Is it the bankers’ usury that brings excess profits? – Opinion – SAPO.pt

Much has been said about the “excessive profits of the banking industry”, creating an image of exploitative bankers who gain weight at the expense of the poor who need them to buy houses, while these poor are mercilessly tortured by those who borrow money. Interest rates have increased tenfold in 15 months.

Those who have suffered from the rise in EURIBOR will forgive me, but everything is wrong in this simplistic and populist discourse – and it is unfair, not to mention willingly biased, to draw the broad conclusion that the banks are the villains in this story and society must unite against it, Robin Hood-style.

Yes, the five largest banks posted record profits last year, and judging by the first six months of 2024, they are set to repeat the feat: €2.6 billion raised between January and Juneabout a third of which was provided by Caixa Geral de Depósitos. But did they really achieve this at the cost of vile greed and inflexible usury? In a country where families, companies and even countries are struggling to survive Credit ——At the end of the year, Portuguese Bank Number Pointing out debt levels of €150 billion (ten years at most), €300 billion and €360 billion – I find it hard to believe that this is actually the case.

First of all, it is important not only to remember that without a loan the vast majority of households would not be able to afford a house, but also to not forget that it was not the banks that raised the interest rates. The Euro Interbank Offered Rates, which determine the interest on the approximately 100 billion euros of loans owed by the Portuguese to banks for the purchase of their homes, rise, as we know, by order of the European Central Bank (ECB), which determines the interest rates. They rise for one reason only: the need to control the galloping inflation, which, in fact, deprives households of a large part of the purchasing power that had been frozen for years. The fact that Christine Lagarde decided to change the interest rates only too late – anticipated by the US central bank, the Federal Reserve, four months in advance – forced the action to be even more drastic, with 10 hikes in 15 months, raising the interest rate by 450 basis points, keeping it at 4% until it suffered a slight cut. (-25 points) This June.

Secondly, unfortunately here we are still subject to the “you’ll see later” and “when dicks come and go, it’s easy on your back”. If in Portugal variable rates were not favored and most people chose fixed or mixed rates like in other European countries, the sensitivity to fluctuations would not be so high. The European Commission itself has issued several warnings about the size and form of credit in Portugal, although Portugal Last year, loans were granted with more cautionmore than 80% of housing loans continue to be linked to floating rates. In fact, this puts us in a leading position Five of them are from the most vulnerable countriesand Finland, Lithuania, Estonia and Latvia, where savings levels are pitifully low, the impact is further exacerbated. Both will have a negative impact on banks, when interest rates suddenly rise, this will not only result in households being unable to pay what they are required to pay (we are well aware of the impact of banks leaving homes on their balance sheets), but there will also be no deposit buffer to grow the funds, which are the product of your business.

Third, what is unusual is that interest rates remained at zero, almost for a decade, and reached negative values ​​- probably many people no longer remember the unusual situation experienced after the financial crisis, in which banks were obliged to provide customers with the amount of interest they received for signing a contract. Here, too, savings are penalized: if the interest rate is close to zero, then you will receive money in installments.

That being said, banks are not benevolent saints driven by a desire to help others. On the one hand, it is its goal to make a profit by “selling” money, just as TAP is selling plane travel and Autoeuropa is manufacturing cars. On the other hand, since banks find themselves unable to earn interest, they charge fees and commissions for everything they (un)like to make up for their losses. If they had applied the ECB’s increase in credit rates immediately, they would need time to reflect this in the interest on deposits; they only partially did so, thus achieving Financial profit margin hits record high Better than 60%.

Whether it is out of a desire to improve performance and increase profits, or because the memory of those difficult years is still fresh, The financial crisis left them on the canvas For a decade, they forgot to end the concurrent fees and commissions, which continue to burden customers and delay fair compensation for deposits.

But let’s be clear: banks play a fundamental role in the national economy. Directly, by providing financing to businesses and households that would otherwise be unable to raise capital, and indirectly, by accumulating positive results that also translate into investments, dividends, and millions of dollars in tax revenue.

To be sure, if the efforts of the banks over the past decade have paid off in a big way, it is the state that has benefited the most across the board. One need only look at recent results for proof of this.

First, the dividend due for the 2023 results is 525 million euros, plus the Public Bank decided this month to pay an additional 300 million euros to additional shareholders, due to the 900 million euros of profit achieved in the first six months of 2024 (the second place Santander did not achieve 550 million). Only these 825 million in dividends (in OE, half was expected) Paying a raise The government will distribute it to teachers this year.

In terms of taxes and revenues, Caixa will pay an additional 250 million euros, which will go directly into public coffers and this year the public bank will bring billions of dollars in revenue to the state.

Combined, the five largest banks alone would have paid $1.3 billion in taxes related to last year’s excess profits. The state raised 1.5 billion eurosdouble what was achieved in 2022, and almost a fifth of the total allocated to the IRC in a single year. To this we must also add the special taxes levied on banks, including the banking surcharge (created in 2011 to finance resolution funds), which last year allowed for an additional allocation of €38 million, and Further solidarity in the banking sector (created in 2020 to “punish excessive profits”, which the Constitutional Court has deemed in violation of the Basic Law), has reached a total of 180 million euros.

All things considered, who makes the most money (and costs the least)?

Editorial Director