Spanish Deposit Yield Limit Positive for Banks, BoAML Says

Spanish lenders would benefit from a reduction in funding costs were the central bank to limit yields offered on consumer deposits, an analyst at Bank of America Merrill Lynch said.

News organizations including El Confidencial and Expansion have reported that the Bank of Spain may force lenders to set aside capital if they pay above certain deposit pricing thresholds. A spokesman for the Bank of Spain declined to comment on the reports when contacted by Bloomberg News.

A surge in the cost of wholesale funding as the European financial crisis deepened last year left banks more reliant on funding from consumer deposits, spurring competition to capture customers’ savings. The potential cap on yields “is good for the sector” because it will allow lenders to benefit from more “normalized” retail funding costs, Sergio Gamez, a London- based analyst at BoAML said in a report published today.

The rule lowering rates on deposits could potentially lift estimated 2014 net interest income for Banco Sabadell SA (SAB), Spain’s fifth-biggest bank, by 244 million euros ($319.7 million), or 12 percent, and Bankia SA (BKIA)’s by 254 million euros, or 10 percent, he wrote.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net