Highlights

Although both rates are disclosed by financial institutions, TANB and TANL serve different purposes. TANB enables investors to compare the nominal returns offered by different deposits, while TANL reflects the impact of taxation on the net return generated by the investment.

Understanding these indicators is particularly important for investors seeking to assess Fixed-Term Deposits from a broader perspective, taking into account not only the advertised return, but also the predictability of returns, liquidity and the suitability of the investment for their financial objectives.

Comparisons between Fixed-Term Deposits are often reduced to the interest rate advertised by financial institutions. However, a thorough assessment requires a more comprehensive approach.

The nominal return is only one of the relevant assessment criteria. The term of the deposit, early withdrawal conditions, the frequency of interest payments, the applicable tax treatment and the predictability of returns can all have a significant impact on the effective return generated by the investment.

It is in this context that TANB and TANL become particularly relevant, enabling investors to assess the return from different perspectives.

The role of TANB when comparing different investment solutions

The Gross Nominal Annual Interest Rate (TANB) represents the annual return on a deposit before tax is applied to the interest earned. Although it does not reflect the investment’s net return, TANB remains the main indicator used in the commercial disclosure of Fixed-Term Deposits and an essential reference for comparing the returns offered by different financial institutions.

By excluding the impact of taxation, TANB makes it possible to compare products with similar characteristics using a consistent criterion. However, interpreting this indicator in isolation may lead to an incomplete assessment of the investment’s return.

TANB and TANL: why they should be considered together

The Net Nominal Annual Interest Rate (TANL) takes into account the tax applied to interest and reflects the net return used in the calculation.

TANB and TANL are not competing indicators, but complementary ones. While TANB enables investors to compare the returns offered by different Fixed-Term Deposits before tax, TANL shows the net return after taking taxation into account.

Considering these indicators together provides a more complete view of an investment’s potential return, allowing investors to assess both the advertised return and the return effectively available to them.

It is also important to note that a higher nominal return does not necessarily mean that a Fixed-Term Deposit is the most suitable solution. When comparing different products, investors should also consider factors such as:

• the investment time horizon;
• flexibility regarding early withdrawals;
• the frequency of interest payments;
• the minimum deposit amount;
• the predictability of returns;
• the role of the deposit within the overall investment strategy.

In certain circumstances, a deposit with a lower TANB may be better suited to the investor’s needs, particularly when liquidity, stability or a particular approach to cash management is a priority.

How to assess a Fixed-Term Deposit beyond the advertised interest rate

The assessment of a Fixed-Term Deposit should not be limited to comparing the advertised rate. Even when two products offer similar returns, their respective terms and conditions may differ significantly.

A more comprehensive assessment should consider, among other factors:

• nominal and net returns;
• the term of the deposit;
• the predictability of cash flows;
• early withdrawal conditions;
• the method and frequency of interest payments;
• the minimum deposit amount;
• the protection provided by the Deposit Guarantee Fund;
• the role of the deposit in portfolio diversification;
• the product’s place within the overall investment strategy.

Considering these factors together enables investors to compare deposits more thoroughly and select the solution best suited to their profile and objectives.

TANB and TANL perform different but complementary functions when assessing a Fixed-Term Deposit.

While TANB provides a reference for comparing the returns offered by different products, TANL helps investors understand the impact of taxation on the investment’s net return.

However, the assessment of a Fixed-Term Deposit should not be limited to these indicators. The term of the deposit, liquidity, the predictability of returns, early withdrawal conditions and capital protection remain key factors when selecting a solution aligned with each investor’s financial and wealth-related objectives.

This communication has been prepared by Banco Finantia for information purposes only and does not constitute investment advice or a recommendation to invest. In preparing this communication, no consideration has been given to any investor’s investment objectives, financial situation or specific needs. Accordingly, the information has not been tailored to any actual or potential investor, nor have any particular circumstances relating to such investors been taken into account.

The information provided is based on market conditions prevailing at the date of publication and on information obtained from recognised third-party sources of a public nature. Banco Finantia has not independently verified the data or information provided by such sources. By receiving this communication, the recipient acknowledges this fact and agrees that Banco Finantia shall not be held liable under any circumstances for any errors, omissions or inaccuracies contained herein or arising from the use of this information. Banco Finantia accepts no responsibility for any direct or indirect loss or damage that may result from transactions undertaken on the basis of the information provided.

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