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Private households in Germany: Regional differences in banking

November 21, 2019
Region:
In the lending and deposit-taking business with retail customers, there are substantial differences between the federal states. 30 years after the fall of the Berlin Wall, per capita loan volumes in east Germany are significantly lower than in the west. The latter, in turn, is characterised by a certain north-south divide. Savings banks have a market share of 25-35% throughout the country, whereas cooperative banks have a much stronger presence in the south and west than in the east and north. The large banks achieve an above-average market share of 20-25% in the city states and east Germany. The spread between the federal states is smaller for deposit volumes than for credit volumes. Primarily the savings banks, cooperative banks and other commercial banks have to cope with a considerable deposit overhang and thus an "investment plight" in the negative interest rate environment. In east Germany, the deposit overhang is particularly large. Due to digitisation, changes to the established regional focuses might now be possible. [more]

More documents about "Banking and financial markets"

166 Documents
May 20, 2020
Region:
1
European banks have taken a substantial initial hit from the corona crisis in Q1, but so far digested it relatively well. Nevertheless, more pain is surely to come. While revenues and costs were both down only mildly, loan loss provisions shot up and almost wiped out industry profits. Capital levels dropped quarter-over-quarter, yet less than feared as banks cancelled 2019 dividends. Balance sheets expanded by a record-breaking 10% compared to year-end due to growth in corporate loans, higher liquidity reserves at central banks and increased derivatives volumes. [more]
May 4, 2020
Region:
2
During March, the first month in which the coronavirus pandemic made itself felt in Europe, banks' balance sheets grew substantially. On the one hand, euro-area banks raised enormous amounts of liquidity from the ECB, other financial corporations and non-financial companies. On the other, they just kept a large part of that at the central bank or lent it to other banks and other financial corporations. In addition, banks extended markedly more credit to non-financial firms which likewise stacked up their liquidity buffers to prepare for weaker cash flows as a result of the looming massive recession. The crisis so far had no major impact on banks’ retail business and their holdings of government bonds. [more]
April 22, 2020
3
The economic slump is taking its toll on the banking industry. For the major US banks, profits in Q1 more than halved compared to the prior year, as loan loss reserves jumped. Revenues declined moderately with weakness in interest income and fees and commissions partly compensated for by a jump in trading income. Deposits, loans and other assets surged because clients hoarded liquidity. Banks’ capital ratios fell only somewhat and they remain well capitalised. Banks in Europe may have faced similar trends overall but will probably have benefited less from the supportive trading environment and suffered more from declining capital ratios. They are also handicapped by their much lower starting level in terms of profitability. [more]
April 8, 2020
Region:
4
The banking industry in Europe is entering the corona recession with strong capital levels and ample liquidity, though still only moderate profitability. Revenues will come under substantial pressure this year, loan loss provisions will jump and net income will fall materially – many banks may well make losses. However, there is likewise massive support from the public sector, with governments propping up the real economy, central banks the financial markets and supervisors relaxing rules for banks. This should mitigate the hit. Nevertheless, the risks are profound and a prolonged shutdown could even trigger a renewed banking crisis. Enormous uncertainty regarding its depth and length notwithstanding, the current crisis may well turn out more severe than the macro-financial shock scenario underlying the latest European bank stress test. Its magnitude could possibly even exceed the financial crisis and the Great Recession. [more]
March 24, 2020
Region:
5
We identify the impact of negative rates on household portfolios in Germany. Real returns on cash and deposits stood at -1.2% in Q1 2019. Due to that, Germans lost around EUR 150 in real terms in 2019 per person, compared to the 1991-2014 average. The aggregate loss including claims on insurance for a representative household was roughly EUR 540 per year. The richest 10% of Germans hold 60% of the financial wealth and probably have significantly higher losses. In 2019, net lending to private households in Germany reached a new record of EUR 59.5 bn (+4.8% yoy). Mortgages saw a record increase of EUR 53 bn (5.3% yoy). Deposits rose by EUR 41.1 bn in the seasonally strong final quarter. In 2020, mortgage growth is likely to slump, even stagnate. The corona virus pandemic will probably lead to a reduction in household income and possibly to bottlenecks in the issuance of building permits. [more]
March 19, 2020
Region:
6
Fighting the corona crisis: Whatever it takes. The government’s support measures so far include greater access for firms to short-time allowance, tax moratorium and the potential provision of state guarantees of up to EUR 460 bn. We expect the government to come up with additional fiscal stimulus measures soon. The budget balance could post a deficit of 3.5% of GDP in 2020/21. (Also in this issue: KfW programmes to support corporate Germany – A primer. Corporate lending in a corona recession: Development banks as an anchor of stability?) [more]
March 18, 2020
Region:
7
Corona recession – depth probably close to 2009 slump. Within days lock-down measures and (temporary) factory closures have reached a level that suggests a far bigger H1 contraction than previously thought. In our new baseline scenario we expect GDP to decline between 4% and 5% in 2020, notwithstanding a recovery in H2, as – in contrast to 2009 – the service sector will be hard hit, too. (Also in this issue: the German government's support measures, labour market, industrial recession, auto industry, corporate lending, the view from Berlin) [more]
February 24, 2020
Region:
Analyst:
8
German retail clients have shown relatively little interest in passive investment alternatives, compared to traditional mutual funds. Robo-advisors, which primarily invest in ETFs, have seen the number of their clients and AuM grow. German robo-advisors could manage about EUR 25-35 bn in 2025, up from EUR 4 bn today. Their pioneer clients are largely male, middle-aged and high-income. They value full control and autonomy in their financial decisions and deal with financial matters mostly online. Still, they visit bank branches quite frequently. [more]
February 10, 2020
Region:
9
After very weak December data a small drop in Q4 GDP seems likely. Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy. We assume that the corona outbreak will shave off 0.2pp of Germany's Q1 GDP, making a technical recession quite probable during the winter half. [more]
December 19, 2019
Region:
10
European banks continue to strive to not fall further behind. Revenues and costs in the first three quarters of 2019 were flat compared to their levels a year ago. Remarkably, interest income rose despite even lower interest rates. Loan loss provisions edged up from record lows. Net profits fell moderately but remained solid. Balance sheet growth was the strongest in years as banks fight to hold their ground against an array of new competitors. Along with the struggle to improve revenues, 2020 may be shaped by Basel IV implementation, continuing geopolitical risk and a fragile macroeconomy. [more]
December 18, 2019
Region:
11
ETFs have gained in popularity among private investors who have expanded their ETF investment multiple times in recent years to approximately EUR 35 bn. Nonetheless, ETFs remain a niche product for private investors considering that their total mutual fund assets amount to EUR 622 bn. ETFs have been introduced as passive investment vehicles, but active ETF management is on the rise. The sustained low-interest rate environment could allow ETFs to tap into new client segments. In Q3, loans to German households were up by a record EUR 17.9 bn qoq, driven by a record surge of EUR 16.3 bn in mortgages. Deposits grew by EUR 13.6 bn – the smallest increase in seven quarters. The fact that some banks impose negative rates on deposits seems to create negative sentiment among German savers. [more]
November 20, 2019
Analyst:
12
Trading volumes in foreign exchange instruments have increased significantly across the board in 2019 compared to the last global FX survey three years ago. Surprisingly, the pivotal role of London as the main trading location was reconfirmed, despite fears around the impact of Brexit. Yet a general move to central clearing might challenge this after the UK leaves the EU. [more]
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