LONDON/DUBLIN- (Reuters) – European savers are withdrawing more money from banks in search of a better bargain, as lenders refuse to pay up to hang on to deposits that they believe they can temporarily manage without.

The pattern revealed as several of the region’s largest lenders reported a successful start to the year, along with a peek of a phenomena known as a “bank walk” – a gradual but noticeable outflow of consumer capital.

Lenders had little time charging more for loans when interest rates rose from an almost 15-year sleep around zero last year, but most have been slow to raise deposit rates paid to millions of their clients.

Profits at several large banks have risen beyond many experts’ projections, but savers are dissatisfied, prompting new concerns about the sector’s long-term health.

“Traditional banks must decide whether to maximise their return by keeping deposit rates as low as possible, or to prioritise liquidity and stability by raising rates and keeping customers’ funds,” said Nicola Marinelli, assistant professor of finance at Regent’s University London.

As high levels of inflation persist, money market funds are proving popular among savers seeking higher returns on their cash.

Returns on these funds have only marginally outperformed bank deposit rates in recent years, however the Crane sterling denominated Money Market Fund index posted a 7-day annualised yield of 4.12% as of April 25, compared to certain bank interest rates still hovering around 1%. The equivalent in euros was 2.81%.

According to Refinitiv Lipper, net flows into European money market funds were more than 34 billion euros ($37.6 billion) in March, making them the best-selling asset class that month.

The fund class was already valued more than 1.4 trillion euros at the end of last year, but it still pales in comparison to the 9.45 trillion euros kept in current, or checking, accounts at eurozone banks.

Between January 1 and April 26, Fidelity International reported an 8% year-on-year increase in flows into money market funds on its investment platform.

In an area where consumer organisations think individuals are more likely to ditch spouses than banks, senior bankers have dismissed the danger presented by decreased deposits.

When asked about a 1.6% fall in deposits in the first quarter, UniCredit CEO Andrea Orcel said the bank’s liquidity situation was so strong – with a coverage ratio of 163% – that it could afford to seek profitability in managing its deposit base.

The larger drop in deposits may also help banks balance their obligations – mostly what they owe depositors – against a projected drop in assets, as lending demand slows.

However, lenders must also ensure that they have enough liquidity and capital on hand to cover lending bets that could go bad at any time.

Most banks tout liquidity and capital levels beyond regulatory standards, but the failures of Silicon Valley Bank in the United States and Credit Suisse in Switzerland are cautionary examples of what might happen when consumers abandon institutions at a faster rate.

In the United Kingdom, NatWest (NWG.L) clients withdrew 11.1 billion pounds in the first three months of the year, while HSBC’s deposits, excluding one-time inflows, fell by $10 billion to $1.6 trillion, while Barclays and Lloyds Banking Group had drops of 5 billion and 2.2 billion pounds, respectively.

In Germany, Bundesbank figures reveal that household deposits fell over 8% year on year, with Deutsche Bank, the country’s biggest bank, attributing part of its own 4.7% decrease in the first quarter to worries of contagion from the financial crisis in the United States and Switzerland.

However, Chief Financial Officer James von Moltke acknowledged that increased competition, including “some price-sensitive deposits leaving the bank” and some clients shifting to higher-yielding alternatives such as money market funds, played a role.

BNP Paribas in France likewise reported a small drop in first-quarter deposits, while Santander in Spain was the only European heavyweight to claim a 6% increase during the same time.

Some lawmakers have chastised banks for the disparity between the fees they charge borrowers and the interest rates they offer savers.

“It’s all about profit.” It is done to protect your own profits. “Isn’t that the answer?” British legislator Angela Eagle questioned bank executives during a parliamentary hearing in the UK in February.

HSBC CEO Noel Quinn characterised his bank’s deposit loss as “nothing significant,” while Andy Halford, Standard Chartered’s chief financial officer, told Reuters that he believed clients would eventually value security above income returns.

“We will see people parking their money where it is safe,” he said.

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