European banks turn to fees to stop customer habits at branches

  • Caixabank’s Bankia deal could cost some customers dearly
  • Fees on some debit cards, cash withdrawals from branches on the rise
  • Costs are also increasing in Germany and Italy
  • Caixabank’s new policy follows IT integration after November 12

MADRID / FRANKFURT Nov 15 (Reuters) – At Spain’s Caixabank (CABK.MC), most customers who visit a branch for a service they could access online will now have to pay two euros for the privilege.

The fees are part of a shift by European banks, suffering from years of negative interest rates, to start turning the screw on clients who still rely on dense branch networks.

An increase in deposits during the pandemic – which banks then have to pay to park at the central bank – is prompting many European lenders to start withdrawing money from the services they were performing for free.

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“A major part of our business, receiving deposits, is becoming loss-making. What was once part of our core business and our profits are now showing losses,” Caixabank CEO Gonzalo Gortazar said last month. .

As the bank of Gortazar is on the verge of completing the integration of Bankia following its acquisition of 4.3 billion euros ($ 4.92 billion), it is sending its more than seven million new customers the details of the fee policy – including branch usage fees which were detailed in a letter to the customer. seen by Reuters.

The fees on a debit card for non-loyal customers could drop from 28 euros to 36 euros if former Bankia customers do not use a new credit card issued by Caixabank dubbed ‘My Card’, which offers the bank more profitable loan opportunities.

Bankers say this is a necessary decision to maintain profitability.

Spanish banks are struggling to make money from loans, and their income fell 2% in the first half of 2021 compared to the same period in 2020, according to the Bank of Spain.

BBVA (BBVA.MC) now charges 2 euros for a withdrawal of less than 2,000 euros at an agency, while Santander will charge some customers up to 240 euros per year just to keep a bank account if they do not meet certain conditions .

“All of our competitors are doing similar things. You just can’t offer all the services for free,” a deputy retail manager at a major Spanish lender said on condition of anonymity.

INCREASED FEES

In Germany, banks are also introducing new fees.

From November 10, DKB bank started charging fees to new customers on accounts over 25,000 euros, while ING customers will start paying 99 cents per month from next March for cards. debit, in addition to the fee of 4.90 euros per month for accounts that were introduced in 2020.

In Italy, consumer association Altroconsumo said in September that the cost of bank accounts with home banking services had increased by an average of 11-15% in 2021.

McKinsey’s 2021 Global Payments Report released in October said the changes are a response to billions of dollars in revenue lost in net interest income at European banks over the past decade of low or negative rates.

Spanish lenders’ fees rose 16% in the second quarter to 4.18 billion euros ($ 4.83 billion) from a year ago, while mortgages only increased by 0.54% at the same time.

At the end of June, the ratio of Spanish banks’ net commissions and fees to their total net operating income was around 25%, below the average of 32% for European banks and well below 40% for European banks. Italian banks and 37% for banks German banks, according to data from the European Banking Association (EBA).

VULNERABLE CUSTOMERS

Some officials warn of the risks of growing financial exclusion caused by the changes, despite efforts by banks to offer exemptions to elderly customers.

“Although the closure of agencies in rural areas may be justified by the search for profitability and a drop in demand, this decrease affects the population, particularly in relation to access to cash, which cannot be covered, as other banking services, through electronic payment. “, said the Bank of Spain in its latest annual report.

Even in cities like Madrid, older customers can feel left behind.

“I received an email notification regarding potential fee increases, but my PC is not functioning properly and I am having difficulty using the app on my mobile,” said Carmen Reyes, 78, who said he was Bankia customer for 70 years. .

“If they closed my branch, I would leave.”

($ 1 = € 0.8734)

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Report by Jesús Aguado; additional reporting by Tom Sims in Frankfurt and Valentina Za in Milan; edited by Rachel Armstrong and Gareth Jones

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