Banks: Greeks are turning their backs on high yields and maintaining…Savings

The majority of depositors remain reluctant to use excess liquidity to achieve a high yield, despite the opportunities presented in the current environment of rising interest rates in the Eurozone.

According to the most recent data from the Bank of Greece, the majority of household wealth is parked in virtually interest-free demand deposit accounts.

Even the recent adjustments of interest rates on pre-agreed duration products (time deposits) did not prove to be enough to change the balance, while low flights are also recorded in the mutual funds market.

Banking sources note that in Greece only 8% of household movable property has been placed under professional management. This is the lowest percentage in the Eurozone, with second place Portugal above 15% and other countries even at 50-50.

The same circles emphasize that of the money kept in banks, 75% is placed in open demand programs (Savings, current accounts), where returns are zero.

Savings may have moved to time deposits since the beginning of the year, but their share remains extremely low, around 25%, and a long way from the banks’ forecast for it to climb to 40% by 2023.

Low interest for mutual funds

The picture is similar in the field of mutual funds. Despite the rally that shares and bonds have recorded since the beginning of the year, both in Greece and internationally, net inflows in the first half of the year amounted to just 1.5 billion euros.

“This is a drop in the ocean, in front of the deposits amounting to 140 billion euros that are in the Greek banks” says the general manager of a systemic group.

According to this source, two main conclusions can be drawn from the available data:

First, Greek savers are risk averse and lack the savings culture found in other mature markets

Secondly, the scope for development of wealth management in Grece is significant. It is enough for the banks to approach their customers in the right way and with the right products

Available options

The truth is that after the significant rise in European interest rates, credit institutions and their subsidiaries have again gained the ability to create attractive investment programs even for the most conservative investors.

Among them, the following stand out:

1. Structured investment products with guaranteed initial capital and in some cases with a guaranteed minimum return and final profit depending on the course of specific financial indicators.

They are aimed at investors who do not want to take risk, but are looking for a high return of the stock market level, with only the risk of losing the interest they would receive if they put the money in a term deposit.

2. Mutual funds that invest in bonds and promise an annual dividend payment.

These are products that are recommended to those with an investment horizon of 5 years.

They are a relatively safe option, due to the diversification of their portfolio and the investment in securities with a duration equal to the life of the fund.

And with the prospect of the start of the de-escalation cycle of European interest rates sometime from 2024 and later, they can provide high capital gains, beyond the annual interest rates.

Besides, their advantage is the fact that under certain conditions they generate regular income, through the return of capital to shareholders.

3. Mutual funds with a guarantee on the initial capital of the investment, from 80% to 100%, which through their exposure to stock and bond markets can achieve high returns.

For example, a systemic group currently has a product on the market with the investor’s capital secured and a return that can reach up to 32.5% in 5 years.

4. Baskets of mutual funds, available without entry and exit fees and aimed at those who wish to make regular savings, which can even start from 50 euros per month.

In this case, the investment is made at different prices. Thus, the effects of market fluctuations are smoothed out compared to a one-time placement at a statistically random point in time.

5. Savers can also achieve high returns with fixed income securities, such as bonds and interest-bearing government bills.

A typical example are the new securities of the company Mytilineos, which are currently on public offer, with a coupon that will range between 4% and 4.5%.

In fact, the terms of the bonds provide for the six-monthly payment of interest, while the minimum investment amount is only 1,000 euros.

On the other hand, an absolutely safe option with high yields are the interest-bearing bonds of the Greek government, which are issued on a monthly basis.

On Wednesday, three-month bonds were issued, with their yield reaching 3.59% at the auction, while a few days ago the six-month interest rates were available at 3.65%.