Banks: Number of cooperative banks drops to 775

Volksbank

The number of cooperative banks in Germany continues to decline. There are currently 775.

(Photo: action press)

Frankfurt After the corona crisis slowed the pace of mergers at Volksbanks in 2020, there will be significantly more mergers again in 2021 – but this is not a catch-up effect. As the consulting firm Zeb found, the number of cooperative banks has fallen by 43 to 775 in the current year.

This corresponds to a minus of five percent compared to the end of 2020. Further mergers are unlikely to be added until the end of the year.

In 2020, the number of Volksbanks, Raiffeisenbanks and other cooperative institutions only fell by 27. In the three previous years, the decline had been between 34 and 57 – so there were sometimes twice as many mergers. The industry association of the cooperative banks, BVR, said in March that it expected 40 mergers in 2021. The assessment should also apply for the next few years.

Zeb partner Heinz-Gerd Stickling assumes that the merger dynamics at the Volksbank and Raiffeisenbanken will remain high, but that the pace will not increase. “There is no spilling wave of mergers that would call the tried and tested system of decentralized regional banks into question for the coming years.” Zeb expects that by the end of 2025 there will be more than 600 cooperative banks left.

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The German banking system stands out within Europe. The number of money houses here is much higher than in other countries. There are also three different types of banks: cooperative and private banks and savings banks. The savings banks and cooperative banks are usually only active in a defined business area.

Mergers are an ongoing phenomenon. There have been phases in the past when the number of cooperative banks has fallen dramatically. For example, because many Volksbanks and Raiffeisenbanks, which were often both in one place, have come together to form “VR banks”. In 1970 there were more than 7,000 cooperative banks, in 1991 a good 3,100 and in 2011 around 1,100 cooperative banks.

Pressure from negative interest rates continues

As a reason for mergers, Stickling cites the pressure from negative interest rates in the euro zone, high regulatory expenses and necessary investments in digitization and that many board members are about to retire. “This is and should always be a checkpoint for possible mergers.”

Occasionally, similarly sized cooperative banks have many board members, at least shortly after a merger. Sometimes there are six or seven – which is actually too much. There are also frequent mergers of three financial institutions under the Volksbank and Raiffeisenbank, five times in 2021.

Due to the negative interest rates and the bond purchase program of the European Central Bank, the interest income, which is particularly important for savings banks and Volksbanks, is melting away despite the strong credit growth. At the savings banks, the interest surplus made up 70 percent of the total result, at the Volksbanken 72 percent.

Stickling expects that the merger dynamics at the savings banks will accelerate slightly. According to the Zeb forecast, however, there will still be more than 300 savings banks at the end of 2025. Currently, including the Berliner Sparkasse, there are 371 – six fewer than at the end of 2020. In 1991 the number of savings banks was a good 730, in 2011 it was just under 430.

The difference between the smallest and the largest savings bank is enormous. Hamburger Sparkasse as number one had total assets of 55 billion euros at the end of 2020, while Stadtsparkasse Borken came to 200 million euros.

Among the cooperative banks, the Apotheker- und Ärztebank leads the way with 59 billion euros, followed by the Berliner Volksbank with total assets of almost 17 billion euros. Opposite is Raiffeisenbank eG from Struvenhütten in the north of Hamburg. Your balance sheet total was last 19 million euros.

More: Financial advice, old-age provision, deposit insurance – what the traffic light plans mean for German banks.

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