February 27, 2023
Bloomberg recently published an article featuring Mark Williams, Master Lecturer of Finance, discussing how banks in many parts of the world are scoring profits as rates soar.
Bankers in many parts of the world are back in the hot seat. This time, however, they are being blamed for making too much money instead of losing it. As interest rates soar on everything except deposits, banks are scoring large profits on the widening gap between what they charge borrowers and pay to savers. The gap between the highest and lowest saving rates continue to widen, with customers needing to be vigilant to get the best return. There is little incentive for banks to offer good rates to attract deposits as they are awash with cash due to the savings customers built up during the pandemic. However, by not sharing higher interest rates with depositors, banks are missing opportunities to generate lasting good relationships with customers that would produce a longer-term benefit. Williams states, “Doing so would help create greater customer loyalty and could foster greater overall profitability as banks attract more customers through more favorable rates”.