Czechs are behaving rationally during the crisis. They put money aside and do not take out loans unless necessary, a new study by ING has revealed. They can be rewarded in the form of cheaper holidays because the crown keeps on firming, analysts say.
Czechs mainly put their money into time deposits and savings accounts, and do not take out unnecessary loans. Their behaviour thus goes against current trends in the Europe, the study reports.
The loan to deposit ratio for Czech households is 60%. In other words, if the average Czech owes CZK 100,000, then his savings reach CZK 166,000. By contrast, the average Hungarian with a CZK 100,000 debt only has savings to the extent of CZK 52,000. According to Czech National Bank data, deposits of Czech households exceed CZK 1.5 trillion at present.
The crisis has been unable to stop savings for the time being. Since the beginning of this year, household deposits in banks have risen by CZK 100 billion. Nevertheless, the Europe-wide trend to live on credit is slowly coming to the Czech Republic and Czechs are starting to borrow to a greater extent. The amount of loans provided to Czech households exceeded CZK 900 billion at the end of May. The loan to deposit ratio has increased by 15 percentage points over the past three years.
Saving up for the holidays
Home-building savings and savings accounts is what Czechs find most attractive, the study says. But savings accounts are even more popular because of their high liquidity. Unlike time deposits, clients can withdraw their resources immediately or within a few days. According to the study, people also consider the fact that banks often do not charge fees for savings accounts.
The study also showed that clients decide mainly by the rate of appreciation and by the comprehensibility of terms and conditions applying to a certain product. “Too many unclear conditions and asterisks in the text often discourage people from choosing other financial products,” said Libor Vaníček, marketing head at ING.
“It is possible that people withdraw some of their savings as a result of exchange rate moves and spend the money for cheaper holiday packages,” Karel Potměšil, analyst with Cyrrus, told the online daily Týden.cz. He added, however, that especially some people, hit by job losses, will not be able to afford that.