Belgium's major banks have posted an enormous surge in profits over the first half of this year, calling into question their repeated claims that they have no margin to increase customer savings rates.
According to figures published by De Tijd, Belgium's six largest banks (BNP Paribas Fortis, KBC, ING Belgium, Belfius, Argenta and Crelan) recorded total net earnings of €3.1 billion over the first six months of 2023 – roughly a quarter more than the same period last year.
The newspaper also suggested that much of this profit growth can be attributed to recent interest rate hikes by the European Central Bank (ECB).
BNP Paribas saw its interest income more than double over the noted period; ING Belgium, Crelan and Argenta all experienced interest revenue increases of at least a third whilst Belfius and KBC posted interest earnings growth of 30% and 12% respectively.
Feeling the pinch or tight-fisted?
News of the Belgian financial sector's soaring profits will likely intensify pressure on banks to hike their savings rates. Belgian policymakers repeatedly complained that banks have failed to pass their increased profits onto savers despite repeated ECB interest rate hikes over the past year.
At its last meeting in July, the ECB increased its benchmark deposit facility rate (the rate earned by banks when they park funds overnight at their country's central bank) to a record high of 3.75% – well above the savings rates Belgian banks currently offer to their customers.
However, Belgium's financial institutions have vigorously resisted demands to raise savings rates, arguing that such an increase "could profoundly affect the stability of the banking sector".
"Each bank has a different business model and must carry out its own risk analysis and estimate the savings rate it can offer," Febelfin, the Belgian financial sector federation, said earlier this year.
Will bonds break the banks?
The failure of banks to heed the Federal Government's demands played a large role in launching the special one-year government bonds that were recently issued.
The bonds, of which €21.9 billion were eventually purchased, were explicitly described by Finance Minister Vincent Van Peteghem as an attempt to "boost competition and encourage banks to raise interest rates".
However, analysts are divided on whether the bonds will ultimately achieve their main objective. Speaking to De Morgen, Assistant Professor of Finance at KU Leuven Gertjan Verdickt said that he could easily envision banks increasing their rates in the near future.
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"I wouldn't be surprised if one big bank raises interest rates soon, and then the others follow quickly," he noted.
Other experts argue that even if banks do eventually increase their rates, this will likely only be a consequence of ECB policy rather than the bonds.
"Savings rates may increase in the near future," one banker said. "But that is the usual delayed reaction to the ECB's higher policy rate. The government bond saga will not encourage the big banks to increase their savings rates."
