Tag: customer loyalty

Santander Reduces Its Mortgage Spread Further, To 1.49%

18 March 2015 – Expansión

The second reduction of the year / The entity has decreased its spread over euribor on its mortgages from 1.69% to 1.49%, to match ING’s offer.

Santander has reduced the cost of its mortgage once more to place its product amongst the most attractive in the market, as the all out war continues in the sector. For the second time this year, the group has reduced the interest rate on its home loans: the rate paid (by borrowers) during the first year hereby falls from 2.45% to 2%; and from the second year onwards, the spread over euribor decreases from 1.69% to 1.49%.

With this move, Santander is now positioned in line with the strategy of (many of) its competitors such as ING, Bankia and Bankinter, which have all lowered the spreads on their mortgages to around 1.5% over the last month and a half. However, it does not match the rate of 1% being offered by Kutxabank, the lowest in the sector.

To obtain these conditions, clients must hold various products with the bank. Mortgage holders will have to receive their salaries in their accounts with the entity and they must earn a minimum monthly income of €2,000. In addition, mortgage holders must pay three bills (direct debits) from their Santander accounts, use the bank’s cards, and also take out home and life insurance policies with the entity.

Mortgages have become a key product for Santander in its efforts to achieve its main goal: namely, to increase the loyalty of its customers. Mortgage (marketing) campaigns targeted at individuals and Project Advance, which focuses on SMEs are the ‘hooks’ with which Santander is seeking to attract and retain customers in Spain, which currently number 12.6 million.

The entity’s mortgage portfolio in Spain amounts €47,000 million. Although the new loan book grew by 64% in 20134, its total stock decreased by 5.8% last year, from €50,000 million at the end of 2013.

Santander holds a market share of 10.2% in the mortgage sector in Spain, having gained 0.2 points between January and November 2014, according to the latest data presented by the bank. This falls below its market share of the Spanish loan sector (in general), which amounts to 13.5%.

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake

Kutxabank Stirs Up The Mortgage War With A 2.5% Fixed Rate Product

12 March 2015 – Expansión

Kutxabank launches one of the best offers in the market / The Basque entity enters the battle started by Sabadell and CaixaBank and seeks to foster loyalty from its customers.

Kutxabank continues to embroil itself in the mortgage war that has been unleashed in the Spanish financial sector, which is showing the first signs of economic recovery. Two months after the launch of mortgages offering rates of Euribor + 1%, the bank comprising the former Basque savings banks BBK, Kutxa and Vital, has now launched one of the most attractive fixed rate offers in the market: a 30-year 2.50% fixed rate product.

According to the entity, its proposal is the “most attractive” in the market because, not only is it offering a reduced interest rate, also this rate will remain unchanged throughout the life of the loan. The nominal interest rate (‘tasa nominal’ or TIN) of 2.50% represents an annual percentage rate (APR, ‘tipo annual equivalente’ or TAE) of 3.28%, according to the new calculation rules, which include various expenses.

Currently, several institutions are embroiled in the fixed-rate mortgage war. Sabadell is offering a nominal fixed rate mortgage at 3.25% (4.18% APR) over thirty years and at 2.90% over twenty years, and CaixaBank has loans at nominal rates of between 2.50% and 3%, depending on the other products held by the customer, and with no set-up fees. Other banks, such as Bankinter, Bankia and BMN are also offering fixed rate mortgages with interest rates of between 3.4% and 4.6%.

Just like with its variable rate mortgages, Kutxabank is looking to foster loyalty from its customers and achieve maximum links (with them) through this aggressive offer . As such, the entity requires them to have their salaries, which must amount to at least €3,000/month, paid directly into their accounts; make payments with the bank’s cards amounting to more than €3,600/year; make contributions to pension plans or social welfare institutions of more than €2,000/year, and take out life assurance contracts with Kutxabank. The set-up fees for the mortgage will be 0.25%, with a minimum charge of €400.

According to the Basque entity, fixed rate mortgages “provide greater security and stability” for customers, as they allow them to know what their instalments will be, at all times, regardless of (variations in) interest rates (in the wider market).

Kutxabank has a 35% share of the mortgage market in the País Vasco and almost 70% of its total loan book is concentrated there, amounting to €31,000 million. The bank is working on the assumption that the mortgage market is in full recovery, after increasing its home loans by 24% in 2014.

Original story: Expansión (by M. Á. F.)

Translation: Carmel Drake

Popular, BBVA & Sabadell Have Lowered Their Lending Rates The Most

18 February 2015 – Expansión

«We will have to work up a sweat»: Warned the Chairman of the Banking Association, José María Roldán, at the end of last year, when he predicted that the fierce competition between financial institutions to supply credit to solvent clients in Spain would continue well into 2015.

The economic recovery, the lower cost of financing and the ever declining profitability of fixed income securities are spurring a trade war between the banks, which first took each other on in a battle to provide loans to SMEs and then moved onto mortgages.

In the race to expand their customer bases and secure customer loyalty, whilst at the same time protecting their market shares, banks have reduced the cost of credit in the last year, although the size of the reductions vary a lot between entities, according to information compiled from their respective results presentations.

Popular, BBVA and Sabadell have lowered their lending rates the most in the last year. The entity led by Ángel Ron (Popular) leads the ranking in terms of commercial aggressiveness, with a decrease of 34 basis points, which placed its credit yield at 3.53% at the end of 2014. Even so, its yield remains the highest in the Spanish banking sector.

Next, BBVA and Sabadell have applied a price cut of 20 and 19 basis points, respectively, bringing their interest rates to 3.32% and 2.80% in each case. To a lesser extent, Santander has also made its loans in Spain cheaper (by -6 basis points), and so too have Caixabank (-2 basis points) and Bankinter (by one basis point).

Popular, Sabadell and BBVA also lowered their lending rates during the last quarter of 2014, with respect to the previous quarter, whereas all of the other entities chose to maintain their rates unchanged. In any case, the downwards trend in the price of loans granted by Spanish banks is mitigated by the fact that the overall yield depends on the performance of the whole portfolio and not only on that of new loans.

Bankia is not included in this analysis, because it has not yet presented its results for 2014. It is awaiting notification of the percentage of the charge that the Fund for Orderly Bank Restructuring (the FROB) will assume in the payment of compensation for the claims made against its IPO in 2011.

The banks consider that reducing returns on deposits will continue to offset the lower returns on its loans, and therefore they will avoid any squeeze on their client margins, which is following a slight upwards trend, and will allow them to protect their results from the top of the income statement.

However, the price of retail liabilities is ever closer to bottoming out, and therefore the main challenge facing the banks in the short term is to try to offset cheaper loans with higher volumes during a year in which the total credit balance will remain stable or increase slightly, according to some entities.

In any case, in the second phase of the loan war that has begun this year, price is not the only competitive advantage being offered by the banks; they are also increasingly striving to adapt their products to the needs of clients.

In terms of loans to companies, businesses value the speed of response to their loan requests and in-depth knowledge of their business and needs. In terms of the mortgage offer, the requirement to link them to other indicators and products (payroll, average balances, credit cards, insurance, pensions, etc.) is decreasing and the amount loaned as a percentage of the property value (LTV) is increasing.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake