Business Largest Czech bank goes against trend to raise service fees
Česká spořitelna, the largest and oldest savings bank in the Czech Republic, has begun raising fees for many of its services including postage, text messages and cash transactions. The move surprised many analysts as the recent trend among Czech banks was the opposite. The higher charges came into effect this Friday.
In past years, a number of new, small banks entered the Czech market, using the high fees that established banks charge their clients to their advantage by either minimizing these costs or scrapping them altogether. Over a million clients have now set up accounts at smaller banks, forcing larger firms to follow the trend. However, Česká spořitelna has decided to go in the opposite direction.
Financial analyst Patrik Nacher of the website bankovnipoplatky.com which compares deals offered various banks, said he thought this was a standard business strategy which would lead to a higher yield from clients. “The calculus seems to be that the higher earnings from the charges will cover the exodus of many of its clients. It doesn’t make economic sense otherwise,” he news website ihned.cz.
Česká spořitelna is now expected to lose a number of clients over the move as the results of a recent survey showed many of its customers were thinking of leaving the bank for better deals elsewhere.
The bank might have also been motivated by the fact it has had low profits so far this year, partly due to a loss of the Czech crown’s purchasing power. Česká spořitelna’s Austrian parent company Erste Group could thus be pressuring its Czech subsidiary to increase profits. A change of the bank’s business model to target corporate clients instead of minor customers has also suggested as a possible reason behind the move.
The bank itself argues that half of its clients will not affected by the increase in fees because they use banking packages without being charged for money transfers or bank statements. Fees have been raised for updates and internet banking related text messages, electronic transactions to other banks and account statements.
Czechs have recently expressed their discontent with high banking fees when last year, tens of thousands of people joined the Poplatkyzpet.cz initiative campaigning for banks to return money to clients who were charged fees for managing loan and mortgage accounts.
These actions were encouraged by a 2011 verdict by the German Supreme Court. However, the Czech Constitutional Court ruled this April that such practices were in accordance with law which spared banks having to pay back major amounts of money. Despite the ruling, however, many banks stopped charging clients the fees in question.