Saxo Bank CEO slams banks for not passing on rate hikes to savers
The founder of Saxo Bank has criticised Australian banks for failing to pass on the benefits of rising interest rates to customers, saying some had ‘made a killing’ from the practice.
The billionaire founder of Saxo Bank has criticised Australian banks for failing to pass on the benefits of rising interest rates to customers, saying some had “made a killing” from the practice, while also taking aim at rival online trading platforms operating zero commission models.
“Many banks in Europe and elsewhere in the world have made a killing on rising interest rates because they did not share those rising interest rates with their depositors,” said Kim Fournais, the founder and chief executive of Saxo.
The Copenhagen-based investment bank specialises in online trading and investing and commits to immediately pass on any policy rate changes to savers.
“If you have a mortgage or loan, definitely rates are coming up. So that‘s what we are arguing. I think it’s important that there is a win-win (relationship with customers), that they can count on you giving the benefits of rising interest rates also to depositors,” he said.
Saxo is licenced as a bank in Denmark and Switzerland but does not have a permission to call itself a bank in Australia, which means deposits held by its subsidiary Saxo Australia are not backed by the federal government’s deposit guarantee.
Mr Fournais said Saxo shared as much of the benefit of higher rates with savers as possible, even in Australia, paying rates of 4 per cent or more to customer balances that remain uninvested.
Saxo charges $8 commissions for Australian stock trades and $3 per US-listed exchange-traded funds. It competes with online trading platforms provided by CommSec, nabtrade, CMC Markets, IG Markets and Selfwealth, among others.
He criticised challenger brokers promoting Robinhood-style “zero-commission” models as loss-making.
In Australia, discount broker Stake this year moved to charge $3 commissions on share trades following a period of zero brokerage on US stocks.
“I think none of these players are making any money, and their capital levels are very low.”
Mr Fournais said he welcomed the securities regulator focus on “financial stability and consumer protection”, acknowledging Saxo, which has recently been called out by the regulator, had made some “mistakes” but that it had always sought to rectify them.
Earlier this year the Australian Securities and Investments Commission issued stop orders against Saxo Capital Markets and others to protect retail clients from acquiring contracts for difference (CFDs) when the products may not be suitable.
Saxo Australia reported a 6 per cent increase in profit in the 2022 calendar year to $4.5m, according to financial accounts lodged with the securities regulator.
It is hoping for higher growth in coming years by targeting the self-managed super fund sector, which is fast approaching $1 trillion in assets.
“We are focused on ensuring that when we see (higher) interest rates, automatically we raise it for clients as well. So here in Australia, we also get much better interest rates for people who have not yet invested their money … it’s actually important that your money is not just standing there idle.”
The parent company, Saxo Bank, was valued at €2bn ($3.3bn) last year and Mr Fournais, who founded it in 1992, owns 28 per cent. He said there were no intentions or appetite to become a bank in Australia, but argued that being a well capitalised European bank should appeal to SMSF investors.
“Being a bank in Europe allows us to have greater flexibility in what we can do with our clients, but it‘s 100 per cent focused on investments and trading in global capital markets,” he said.
“It gives us some benefits of how we operate the mothership,” while having a capital structure with close to a third locked in capital, provided stability and gave investors “trust”, he said.
“If you want to place your savings long term with someone, you want to make sure that they are safe and can be trusted.”
Mr Fournais said Australian investors continued to be focused on local assets but given the challenging investment settings globally, diversification had never been more important.
“It’s an interesting time in the world with all the geopolitics but also with inflation and higher interest rates … but the fact is that the majority of Australians are very singularly exposed to the Australian market.”
He said that even when SMSFs wanted to diversify, “the (market) offering has not really improved. A lot of the main players are still very expensive, and they don‘t really provide the platforms that would allow you more diversity.”
Saxo Bank’s net profit fell 5.8 per cent to 711m krone ($157m) in 2022, while in the first half of 2023 profit was down 6 per cent to 282m krone.
