The Sparda banks expect that the business with real estate loans, which is particularly important for them, will weaken.
(Photo: imago/Chris Emil Janssen)
Frankfurt The cooperative Sparda banks expect private real estate financing to cool down. “The boom in mortgage lending is over. The highlight was last year,” said the head of the association of eleven Sparda banks, Florian Rentsch, the Handelsblatt.
Nevertheless, Rentsch recognizes “continued demand for real estate loans”. Commerzbank and Hypo-Vereinsbank (HVB) are also observing that customers are hesitant about mortgage lending in view of rising interest rates.
Commerzbank private customer board member Thomas Schaufler said last week that there was clearly a slowdown in construction financing. In addition to the higher interest rates on loans, the fact that the ongoing household costs of potential property buyers have risen due to inflation also plays a role.
For these reasons, HVB private customer boss Marion Höllinger is preparing for falling volumes in the mortgage lending business. “There will be customers who will say: I simply don’t want to put up with these installment burdens in this environment.” In contrast, there are fewer problems with existing real estate financing.
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The German Volks- und Raiffeisenbanken said on Tuesday that business with mortgage lending was still “quite lively”. She could not see a downward trend, said Marja Kolak, President of the Federal Association of Volks- und Raiffeisenbanken (BVR). However, it remains to be seen how the interest rate turnaround will continue to solidify.
Sparda banks abolish custody fees
For German banks, construction financing has been one of the most important sources of income in the private customer segment for years. This applies in particular to the Sparda banks, which are geared towards this business and do not look after corporate customers.
From the point of view of the Association of Sparda Banks, it is currently difficult to grasp what consequences a slowdown in mortgage lending and simultaneously rising interest rates will have in 2022. “It is not yet possible to estimate what the interest result will be this year. That depends to a large extent on the development of market interest rates,” explained association board member Uwe Sterz.
In the past year, the interest surplus of the Sparda banks stagnated. The pre-tax profit for the year rose by almost six percent to 132 million euros, mainly thanks to higher commissions from more fund sales.
The bottom line is that the financial institutions earned significantly less. The net income fell by almost 16 percent to 55 million euros. The profit has already slipped in recent years: in 2014 the surplus was still 148 million euros.
Significant decline in membership
Rentsch described the result as “okay” given the challenges. The Sparda banks are particularly struggling with the negative interest rates in the euro zone because customer deposits significantly exceed the loans issued. Rentsch announced that the Sparda banks would “abolish the custody fees again soon”. According to the comparison portal Verivox, five Sparda banks have already taken this step, not all Sparda banks have introduced negative interest rates.
Rentsch also referred to a ruling by the Federal Court of Justice (BGH) on fee increases in April 2021. According to this, credit institutions need the explicit consent of their customers if they want to raise prices. Many Sparda banks, which had introduced fees on current accounts in the past three years, had to catch up. The association estimated the total burden from the judgment at almost 40 million euros.
From the point of view of the association, the introduction of account fees and negative interest for higher deposits are two reasons why the banks lost customers and members last year – members subscribe to shares in the respective bank. The number of customers fell by 109,000 to 3.95 million in 2021. The number of members even fell by 135,000 to 3.3 million.
At 84 percent, the proportion of members among customers is still high compared to other cooperative banks. Sterz assumes that the number of customers will remain stable this year, the number of members could still drop a little. “This is mainly due to the fact that it has not yet been possible to purchase cooperative shares purely digitally.”
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