A new squeeze announced. With yesterday’s decision, Thursday 10 September, the Governing Council of the European Central Bank decided to raise the ECB’s three reference interest rates by 25 basis points. A choice seen as necessary to stem the growing inflation (even if contested by some economists), deriving above all from an energy crisis that has been going on for months and which is directly dependent on the war between the USA and Iran and the critical issues found in Hormuz and throughout the Middle East. But which, as we have already said, could also affect families and businesses, with an increase in the costs of financing and mortgages.
It is no coincidence that at the center of the Italian political and economic debate there is still the issue of extra profits, which sees the clash between the Lega and Forza Italia, with the Northern League calling for a new confrontation with the banking institutions in view of the next economic maneuver. But how does the mechanism that generates the so-called banking “extra profits” work? And why could the ECB’s decision benefit banks? Let’s go in order.
So banks profit from rising interest rates
Let’s start with a simple concept, but useful to explain what we are talking about. The interest margin is the difference between the interest a bank collects and the interest it has to pay. On the one hand there are the revenues produced by mortgages, business loans, consumer credit and securities; on the other, the cost incurred to remunerate current accounts, deposits and other forms of funding. When the ECB raises rates, both components can increase, but not necessarily at the same speed.
The conditions applied to new loans and variable rate loans tend to adapt quickly. The remuneration of current accounts, however, generally grows more slowly and in the vast majority of cases remains very low. It is precisely this different speed of transmission that creates an advantage for the institutions: the interest collected increases more than that recognized to depositors and the gap widens.
Let’s imagine, in a simplified way, that a bank collects on average 2% on loans and pays 0.2% on collections. The gross margin is equal to 1.8 percentage points. If lending rates rise to 5%, while those paid on deposits reach only 0.8%, the margin increases to 4.2 points. Multiplied by hundreds of billions of jobs, a seemingly small difference can produce several billions in additional revenue.
What the latest ABI data tell us
Moving from hypothetical scenarios to real ones, this scenario is also confirmed by the data released by the latest report from the Italian banking association Abi, last July. In June 2026, the average rate applied by banks on all loans to families and businesses had reached 4.08%, compared to 2.21% in the same month of 2022. In the same period, the average remuneration on deposits went only from 0.32 to 0.67%, while that on current accounts rose from a substantial zero, 0.02%, to just 0.31%.
Between June 2022 and June 2026 the average rate on the entire stock of loans increased by 187 basis points. The rate on all deposits grew by only 35 points and that on current accounts by 29. However, it would not be correct to simply subtract the 0.67% paid on deposits from the 4.08% applied on loans and consider the result as a net gain: the two figures include different products, maturities and risk levels. However, the comparison shows that the transmission of monetary policy was much more intense on the money lent than on the money left by customers in the bank.
A mortgage or variable rate loan tends to adapt quickly to changes in the reference parameters. The same happens for new loans, which are stipulated at the market conditions of the moment. The remuneration of current accounts, however, reacts more slowly.
How much do mortgages and business loans cost today
The average rate on new mortgages for the purchase of a home stood at 3.48% in June, slightly down from 3.50% in May and significantly below the 4.42% reached in December 2023. However, the cost remained much higher than the 2.05% in June 2022. 82.3% of new disbursements were at a fixed rate, a sign that the majority of customers prefer to protect themselves from further fluctuations. With the new tightening imposed yesterday by the ECB, this interest rate is destined to increase, as is that on loans to families and businesses.
For businesses, the average rate on new loans was 3.76%, compared to 3.67% in May and 1.44% in June 2022. In four years the increase was therefore 232 basis points, even more significant than that recorded on mortgages.
On new transactions with families and non-financial companies, the ABI calculates a gap of 208 basis points between the rates applied to loans and those recognized on new funding. In June 2022 the margin was 143 points: the gap therefore widened by 65 basis points.
Because in the long run, high interest rates could (also) damage banks
However, the advantage produced by high rates may reduce over time. More expensive mortgages and financing slow down the demand for credit and can increase the repayment difficulties of families and businesses. At the same time, savers are looking for higher returns, forcing banks to remunerate deposits better or to finance themselves through more expensive bonds. The gap between interest collected and paid thus tends to narrow, while insolvencies and credit losses can increase.
For now, however, banks can count on collections still growing. According to the ABI, in June 2026 customer deposits and bonds had reached a total of 2,166 billion euros, approximately 124 billion more than the 2,042 billion in June 2022, with an increase of 6.1%. The growth was mainly driven by bank bonds, which went from 201 to 283 billion, more than 40% more, while deposits increased more slowly, from 1,841 to 1,883 billion, gaining around 2.3%. The value of the securities and investments held by the institutions has also grown: between May 2025 and May 2026, indirect collections increased by almost 106 billion, of which over 46 attributable to families.
The season of bank profits therefore does not depend on just one factor. It was triggered by the rapid rise in rates, amplified by the slow remuneration of current accounts and supported, more recently, by the recovery of loans, the decrease in non-performing loans and the growth of commissions. The distance remains clear: compared to 2022, the average cost of financing has increased much more than the return recognized to the majority of depositors. It is above all within this range that the explanation for the persistent profitability of the banks lies. And the ever-current debate on how to redistribute the “extra profits” generated by this mechanism.