The Sparkasse Zwickau has long been considered a problem in the public banking sector and is now to be realigned.
(Photo: dpa)
Frankfurt The abrupt turnaround in interest rates exacerbated the problems of Sparkasse Zwickau. “The rise in interest rates has led to high valuation losses in the securities portfolios,” said board member Andreas Fohrmann to the Handelsblatt on Thursday. “As a result, the Sparkasse will be in the red in 2022.” He cannot say exactly how high the loss will be at the moment.
In 2020, the Sparkasse, which has total assets of a good three billion euros, reported a loss of 47 million euros. It was largely due to losses on the stock market. In 2021, the minus, which was offset by precautionary reserves, was five million euros.
On Wednesday, the institute had therefore drawn consequences and announced the leave of absence of long-time CEO Felix Angermann. “The development of the Sparkasse in recent years has made a realignment necessary,” explained Constance Arndt, head of the Sparkasse’s administrative board and mayor of Zwickau. “So now is the right time to clear the way for this.”
The problems at Sparkasse Zwickau show that some banks are not benefiting from the turnaround in interest rates in the short term, but are suffering as a result. The rapid rise in interest rates has led to valuation losses for shares and bonds. According to the Bundesbank, the valuation losses at savings banks and cooperative banks amounted to 12.3 billion euros in the first six months of last year alone.
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The financial regulator Bafin has warned several times that some banks could run into problems because of the abrupt turnaround in interest rates. “Higher interest rates are good for banks in the medium term, but at the moment the valuation losses at many institutions are greater than the positive earnings effects,” said the top Bafin bank supervisor Raimund Röseler in the summer of 2022 in an interview with the Handelsblatt. “Some banks are facing serious difficulties here.”
New board wants to focus more on business in the region
The Sparkasse Zwickau is an extreme case because it has previously had a very strong focus on proprietary investments. “They make up more than 60 percent of the balance sheet total, which is very high compared to savings banks,” says board member Fohrmann.
Across all savings banks, the volume-weighted average of own investments is only 18.5 percent of the balance sheet total, as Barkow Consulting has calculated. The lending business is dominant at most institutes.
However, the Sparkasse Zwickau has the problem that it has relatively little lending business. Like other savings banks in eastern Germany, it grants comparatively few loans and therefore has to invest a large part of its deposits elsewhere. In recent years, she has not had a lucky hand with these systems. It has therefore long been considered a problem within the savings bank sector.
Fohrmann is a restructuring expert and only switched to the board of Sparkasse Zwickau in mid-2022. From 2014 to summer 2021, the 59-year-old managed the Sparkasse Südholstein. This had previously been supported by other savings banks and was also considered a restructuring case at the time.
Fohrmann emphasizes that Sparkasse Zwickau will offset its losses in 2022 with reserves. Even after that, the core capital ratio will probably be around 17 percent – and thus still well above the minimum requirement of the financial regulator.
In the coming months and years, Fohrmann wants to reduce what he considers to be an overly strong focus of the Sparkasse on its own investments and expand the lending business. “The goal is that we turn it into a normal savings bank. It’s about a strategic realignment,” he said. “The savings bank should focus much more on business with customers in the region.”
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