The Listin Diario today publishes a front-page item on the profitability of banking in the Dominican Republic. The newspaper focuses on the spread of interest rates that the banks pay depositors for their savings and that which banks demands for lending money. The newspaper says that it is common for a bank on a RD$50,000 CD to pay RD$2,085 annual yield. But for that same amount of money, when lending it out, the bank will demand RD$15,425 in interest, or RD$1,285 a month.
According to the Central Bank, consumer loans interest rate averages 31%, while banks are paying less than 12% on 180 day Cds, for almost a 20 point spread.
The Listin Diario also comments that interest rates on credit card borrowing are even worse, at 79% a year, or a 6.6% monthly interest rate.
The writer comments that while yield on Cds have dropped considerably over the past months, lending rates have only come down slightly. As a result the spread in favor of banking profitability has increased.