This morning, Bank Leumi (TASE: LUMI) announced "a unique, ground-breaking consumer move". It would be more appropriate to call it a "mock the poor" campaign.
From July, Leumi announced, private customers with current accounts will enjoy "a substantial benefit" - interest at an annual rate of 1% on credit balances in the account. How low is that? According to Bank of Israel figures, the interest rate that the bank demands from Israelis who take consumer loans from it averages a little over 10%. What is more, the interest that you can already obtain from countless liquid and almost risk-free investments (money market funds and the like) is about 4% annually. Incidentally, even this does not cover the real annual rate of inflation in Israel, which is running at 5%.
It’s not just the rate of interest, however. Leumi explained that interest will not be paid to everybody, but only to those who receive their salaries at the bank and who have a mortgage loan from it; or those who receive their salaries at the bank and have a monthly transaction turnover of at least NIS 3,000 on a Bank Leumi credit card; or those who receive their salaries at the bank and have a securities portfolio with it as well. That is to say, only those from whom Leumi can extract money from their other pockets.
The most outrageous condition, however, is the payment ceiling. Interest will be payable only on current account credit balances up to NIS 10,000. According to Bank of Israel figures, credit balances on Israelis’ current account in March 2023 totaled NIS 428.06 billion. That is an average of NIS 200,000 per household, twenty times the ceiling imposed by Bank Leumi. The huge total enables the banks to play with our money, lend it on, and so forth, and post a profit of NIS 15 billion just in the first quarter of 2023 (the aggregate profit of the five major banks).
But hey, now they’ll give you as much as NIS 100 a year (1% of the NIS 10,000) on the balance lying in the current account with them. That’s less than the additional interest you’re about to pay in your monthly mortgage payment after the next jump in inflation and interest rates. And if you borrow a similar sum from them, you’ll pay back ten times more each year. Just so that we won’t forget who is poor and weak here and who’s rich and powerful, Bank Leumi CEO Hanan Friedman declared today that the move was about a strategy "to be the most economical and worthwhile bank", but that is apparently mainly so for Leumi’s CEO and employees. By the way, you can tell him so directly - 050-9999988.
What a pity that this is the first sign of an Israeli bank doing something about the huge amounts of the public’s money sitting in current accounts. It means that this is the extremely low threshold now set for Leumi’s competitors, which will certainly follow in its footsteps shortly.
Published by Globes, Israel business news - en.globes.co.il - on June 13, 2023.
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