BTP or time deposit? Which one is worthwhile today and why

Better a BTP or a time deposit? In principle, the answer depends primarily on one’s risk appetite. But let’s take a look at the numbers. We Wealth asked Paolo Benazzi, head of current and deposit accounts at ConfrontaConti.it and Segugio.it, to come up with a simulation comparing the yield of the best 3- and 5-year time deposits with that of the Btp, considering two sums to invest: 20 thousand euros and 50 thousand euros.

As highlighted by the tables below, offering the best conditions for 36-month constraints among the 36 time deposits compared online by ConfrontaConti.it, Segugio.it, SOStariffe.it and Mol – Gruppo MutuiOnline is Guber Banca, a challenger bank founded in 1991 by Francesco Guarneri (CEO) and Gianluigi Bertini (vice president) and specialized in problem credit management and services for small and medium-sized enterprises. In fact, with a deposited amount of 20 thousand euros, it allows a net gain (net of all charges, taxation, and stamp duty) of 1,968.60 euros, offering a gross return of 4.7 percent over three years; in the case where the deposited amount was 50 thousand euros, the net gain would amount to 4,921.49 euros, over the same term. In the 60-month investment scenario, the time deposit option that guarantees higher returns is offered by illimity, a banking group founded and led by Corrado Passera (in the role of chief executive officer) in 2018.

With a deposited amount of 20 thousand euros, there is a net gain of 3,318.63 euros (which becomes 8,296.58 euros if the deposited amount is 50 thousand euros). In this case, the gross return is, in fact, 4.75 percent. But what happens when investing the same amount in a BTP? To calculate this, the BTP maturing July 15, 2026, for the 3-year term and the BTP maturing July 15, 2028, for the 5-year term were considered. “Even today, on both the 3-year and 5-year terms, it still yields slightly more than the best time deposit (despite higher taxation),” Benazzi says. “There is to remember that the time deposit is 100 percent guaranteed up to 100 thousand euros by the Interbank Deposit Protection Fund (a private law consortium established in 1987 voluntarily and later became mandatory in 2011, ed.). In contrast, the Btp is a financial product that can be bought and resold in the market, and its mechanism is slightly more complex than the time deposit. In the case of the Btp, the yield is given by the combination of the semi-annual coupon and the differential between the purchase price and the nominal value that will be redeemed at maturity,” Benazzi explains.

So better a BTP or a time deposit? “It depends on the investor’s profile,” Benazzi replies. “Probably the time deposit is a more easily accessible product, even online: just choose the one we prefer, click, and continue on the bank’s website. The BTP, however, is more liquid and flexible than a restricted time deposit because it can be resold before maturity, although, in this case, the price will depend on the market conjuncture. Finally, the free time deposit has no liquidity problems because, precisely, it is free, but its yields are much less attractive,” the expert concludes. As a reminder, there are three BTPs on the issue on May 30: a five-year BTP maturing on August 1, 2028 (annual coupon of 3.8 percent), a 10-year BTP maturing on November 1, 2033 (coupon rate of 4.35 percent), and a second 10-year BTP maturing on May 1, 2033 (coupon of 4.4 percent). A new tranche of the 7-year CctEu maturing on October 15, 2028, is added. All this is in anticipation of the new Btp Valore, a four-year bond with a 0.5% fidelity premium and increasing coupons divided into two stages; guaranteed minimum rates will be announced on June 1, while issuance is scheduled for June 5.

Notes:
*Best condition currently available in the market. Proposing Bank: Guber Bank.
**Best condition currently available in the market. Proposing bank: illimity
(1) Net gain: means net of all charges including taxation.
(2) Source of BTP yield: Fineco. For the 3-year term, the BTP due July 15, 2026, was considered, and for the 5-year term, the BTP due July 15, 2028.