The new deposit accounts offered by Smart Bank provide for the payment of accrued interest in full at maturity.
Benazzi states, “For the first time since we’ve been involved in online comparison of deposit accounts, we are witnessing a product with a twenty-year duration.”
In the 20-year investment scenario, with a deposited amount of 20,000 euros, Smart Bank allows a net gain of 20,734 euros
The competition for deposit returns, which are again competing with long-term BTPs, continues. Smart Bank, the digital investment bank of the Cirdan group, has launched three new fixed-rate deposit accounts for 10, 15, and 20 years at 5%, 6%, and 7% respectively. The new instruments provide for the payment of accrued interest in full at maturity but also offer the option of requesting a cash advance.
As explained by the institution, interviewed by We Wealth, investors can take advantage of the opportunity to receive financing for an amount of up to 70% of the invested amount, against a flexible interest rate of 2% above the 3-month Euribor. Meanwhile, interest would continue to accrue on the entire amount originally invested in the deposit account. This opportunity is traditionally only accessible to investors with high net worth or private banking, but the institution is making it accessible to retail investors, who can use the obtained liquidity for other financial or personal needs.
Deposit Account, Now Yielding more than BTPs: What to do
“For the first time since we’ve been involved in online comparison of deposit accounts, we are witnessing a product with a twenty-year duration,” says Paolo Benazzi, head of current accounts and deposits at ConfrontaConti.it and Segugio.it. He conducted a simulation for We Wealth comparing the yield of the three new fixed-rate deposit accounts offered by Smart Bank with that of the 10, 15, and 20-year BTPs, considering two sums to invest: 20,000 euros and 50,000 euros. “As can be seen from the tables, the yield is competitive compared to that of the BTP,” says Benazzi. In the 10-year investment scenario, with a deposited amount of 20,000 euros, Smart Bank allows a net gain (net of all charges, taxes, and stamp duty, which in this specific case are borne by the bank) of 7,406.08 euros. For a BTP maturing on September 1, 2033, there would be 7,175 euros at a gross yield of 4.10%. The option of a 20-year deposit account, with a 7% rate, would almost double the invested capital, obtaining a net gain of 20,734.19 euros (compared to 15,050 euros for the BTP maturing on September 1, 2043).
However, there are several aspects to consider in comparison with government bonds. Firstly, the BTP pays coupons every six months and can be resold at any time on the secondary market, explains Benazzi. “This liquidity is an advantage that becomes more relevant over such a long horizon,” he adds. “Locking in sums without the possibility of releasing them for such long periods and with interest payments only at maturity deserves particular attention in terms of financial planning,” intervenes Rocco Probo, financial analyst at Consultique Scf. “For such long commitments, presumably coinciding in many cases with horizons in line with pension objectives, there are different and more efficient solutions (such as pension funds, which still offer more withdrawal possibilities compared to these solutions),” he adds.
Deposit Accounts: Can you Trust the Best Offers?
The general question is: can you trust the best offers when it comes to deposit accounts? Consultique Scf has developed an internal model for evaluating banks that offer deposit accounts as a dedicated service, analyzing aspects of soundness (including certain capital indicators, including CET), profitability aspects, credit quality (as in default rates on loans granted and coverage rates for impaired loans), and, for larger banks, the perceived market risk. The banking issuers that, according to the latest data as of June 2023, receive the best overall synthetic evaluation are Illimity Bank, CheBanca! (Mediobanca Group), Banca Valsabbina, Banca Farmafactoring, and Banca Profilo. Those obtaining a deemed “sufficient” synthetic evaluation are Banca Sistema, Vivi Banca, Cherry Bank, Banca Progetto, Ibl Banca, Banca Finint, and Banca CF+.
As for Smart Bank – which is not monitored by Consultique Scf – it should be noted that it is a small institution that has recently started its business. According to the latest available financial statements (end of 2022), it is an institution with total assets of 47 million euros, net equity of 15 million, less than 3 million in profit, and 14 employees. It should be remembered that deposit accounts are 100% guaranteed by the Interbank Deposit Protection Fund (a private consortium established in 1987 on a voluntary basis and subsequently made mandatory from 2011) which intervenes in the event of the forced liquidation of a bank. However, the coverage limit is 100,000 euros for each institution and each depositor. This means that, for example, if two or more depositors have a joint account at the same bank, each joint account holder can enjoy a maximum coverage of 100,000 euros; if a subject holds, in addition to the joint account, other accounts at the same institution, the maximum coverage of 100,000 euros applies to the total of the accounts held or co-held.
