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A passer-by walks past a savings bank

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Marco Rauch / dpa

2.9 percent overnight interest rates at the savings bank – at first, the news triggers incredulous astonishment. Depending on where you live, the local savings bank will otherwise offer you a scandalous 0.001 percent (Sparkasse Hannover, Sparkasse Saarbrücken) or a ridiculous 0.2 percent (Sparkasse Köln-Bonn). And in fact, the 2.9 percent interest rate is not available directly from the savings bank, but from a sub-subsidiary of the savings bank group with the beautiful name S-Broker.

Broker as a piggy bank

S-Broker is a subsidiary of Deka, the securities bank of the savings banks. It is actually the first choice for savings bank customers who want to have a custody account for their securities at the savings banks themselves and do not want to pay moon prices for it. With 200,000 customers, however, it is a dwarf, for example compared to ING, whose customers hold more than two million securities accounts. And S-Broker also remains small as a proportion of the more than five million Deka-Bank savings bank custody accounts.

For such a custody account, i.e. a special securities account, customers also need a second account with the S-Broker, a so-called clearing account, from which they buy the securities and into which the proceeds of securities sales are paid back. But that's not all, because now it's getting more interesting: The S-Broker also offers an independent call money account for custody account. There, the red giant has already paid existing customers 0.6 percent or 1.25 percent interest in recent months – up to 500,000 euros. And new customers are now also paid the beautiful new interest rate of 2.9 percent – limited to six months and up to a credit balance of 250,000 euros. So, for a balance of 10,000 euros, you would receive 145 euros in interest after half a year.

Actually, the domestic current account at the savings bank could be the clearing account for savings bank customers. Some regional savings banks also seamlessly network their online banking with the S-Broker. In fact, however, according to the company, a large proportion of S-Broker customers do not find their way to S-Broker through savings bank advice, but independently, in case of doubt also from completely different banks. In any case, the 2.9 percent is only available to those who do not hold the clearing account with a cooperating savings bank, but with the S Broker.

The wide-legged practice of the S-Broker is new, but the idea is not. At the beginning of January, Trade Republic, with a similar number of custody accounts as ING and thus the largest broker on the German market, was the first to understand the new interest rate situation for investors and offered its customers two percent interest on the clearing account – at least for the first 50,000 euros stored there. Three weeks later, competitor Scalable followed suit and even offered 2.3 percent to 100,000 euros. However, only for depots that cost 4.99 euros per month, but then for new and existing depots. Both brokers are among the great low-cost providers if you want to buy and sell securities, as well as store them in a custody account. And both confirmed decent growth since then, both in terms of customers and billions of those customers deposited.

The S Broker – important to know – also has a monthly fee. Although it is cheaper than many custody account models of the regional savings banks, 3.99 euros per month are still incurred if no savings plan exists – and such a savings plan regularly costs 2.5 percent of the invested rate. So you should not put less than 1651 euros on the S-Tagesgeld, otherwise the 2.9 percent interest will be eaten up directly by the monthly fee.

Trade Republic and Scalable are heavyweights in the German market. Together with S-Broker, this means that 10 to 15 percent of securities investors are now likely to receive interest on their clearing account. According to the Bundesbank's statistics, there are around 30 million custody accounts in Germany, but only 15 million customers with securities, many investors have two or more custody accounts.

The motivation of the brokers

Why do brokers do this? In short, it's not magnanimous, but it's customer-friendly. And it's simply clever. Currently, the European Central Bank pays banks in this country 3.25 percent interest if they park their money virtually overnight at the ECB in Frankfurt.

This means that all the money that savings bank customers will park in the reference account with S-Broker in the future will ultimately earn interest from the ECB for the period of time. Just like the billions that Scalable and Trade Republic are already parking there.

But unlike hundreds of billions of euros in current and call money accounts at most of the 357 savings banks, many cooperative banks and private banks. They also park their money in Frankfurt, but they do not pass on the interest paid out to the customers, but put most of it in their own pockets. Recently, the Bundesbank calculated that investors in this country received around 2023.0 percent interest on their overnight accounts (i.e. current and call money accounts) in the first quarter of 1, while the ECB paid banks between two and three percent interest. You don't have to be a mathematician to see that such banks have often pocketed twenty to thirty times more than they paid out.

The next idea of the brokers is, of course, that all the customers who already have money in the clearing account are much more inclined to buy securities. Be it savings plans on market breadth, globally investing ETFs or even individual stocks or even crypto securities (no investment). And it is precisely on these securities transactions that the brokers actually earn their money. The real intention behind the interest rate offer: to turn savers into female investors – in the hope that female investors will be able to earn fees more quickly. According to reports, the interest rate strategy is also catching on with customers. A six-digit number of customers have taken a bite.

And should you bite now?

If you have always wanted to set up a custody account and your house bank does not want to pay interest on the call money account, then the idea of the broker is a good one for you.

  • Create a free custody account so that you can benefit from the development of the international stock market in the long term. Long-term means over ten years or more.

  • To do this, buy one or two market-wide stock ETFs with the money you don't need in the longer term. In the past, seven to nine percent returns were possible on average – even if this is certainly not a forecast for the future.

  • Or start with an appropriate equity fund savings plan.

  • You are welcome to take the interest that is available on the clearing accounts mentioned with you. After all, it's quasi-public interest. And if your bank doesn't work, your broker does, and you then switch, it's called a market economy.

  • But keep your hands off the constant buying and selling of funds or individual stocks. The old stock market adage "back and forth makes pockets empty" also applies when buying and selling, as with the brokers themselves, does not cost much.

  • As a customer, wanting to catch exactly the right moment to buy or sell is presumptuous. As a customer, wanting to benefit from the growth of the global economy in the long term is a sensible strategy.

Good luck!