Banks see room to raise deposit rates further

Estonian banks may still have room to raise deposit rates as savings grow, ERR reports. Higher Euribor rates have already fed through to loan interest rates and are gradually lifting returns on term deposits.

Term deposit rates have risen several times this year. Gaili Grüning, an economist at Eesti Pank, said the first small increase came in June, with a clearer rise visible on banks’ websites in early October. Some smaller banks raised their rates again in early November.

Swedbank has raised deposit rates four times this year, said Tarmo Ulla, the bank’s head of private banking. Its latest increase, two weeks ago, lifted the rate on its savings account from 1.75% to 2%.

Rates on 12-month term deposits at larger banks currently start at 2.45% at LHV. Swedbank, SEB and Coop Pank offer 2.5%. Bigbank and Luminor are offering promotional rates of 3.5% in November. Luminor board member Tanel Rebane said the offer had attracted strong interest and increased the bank’s deposits.

Ulla said further increases were possible, with consumer behaviour, competition and central bank decisions all affecting rates. Rebane said rates could also rise as banks respond to market rates and competitors, without major changes from the European Central Bank.

Household deposits have grown alongside interest rates. In September, growth in household term deposits reached €550 million, about €100 million above the figure for the rest of the year, Grüning said. October figures were not yet available. Household deposits are nearing €15 billion, with about a third held in term deposits. Most remain in demand deposits, which pay almost no interest.