According to the BVR President, the high write-downs of the Volksbanks are only temporary
(Photo: Uta Wagner for Handelsblatt)
Frankfurt The abrupt turnaround in interest rates is weighing on the German Volks- und Raiffeisenbanken. At the end of last year, the 373 cooperative banks had to write off a total of 5.8 billion euros on securities, as their industry association BVR announced on Tuesday. With the rising interest rates, the prices of stocks and bonds fell, the banks have to book the paper at market value.
Some of the cooperative banks reacted to the high value adjustments by liquidating contingency reserves on a large scale. The financial institutions reported a valuation result of minus 4.5 billion euros. Overall, however, the value adjustments and write-downs amounted to almost 6.4 billion euros. In addition to the write-downs on securities, there were corrections to loans of around 600 million euros.
BVR President Marija Kolak was confident that the write-downs in the investment portfolio are only temporary. “The high income that has been regularly generated over the past decade and the capital reserves formed as a result give us the cushion we need to cushion these burdens in the transition to the subsequent appreciation in value,” she said.
Customer deposits increase slightly
In 2022, however, the profit before taxes collapsed. It slipped by 43 percent to 4.4 billion euros. The BVR did not give a concrete outlook for the current year.
The Volksbanks are anticipating sustained high price increases. “It will probably take longer for inflation to normalize,” Kolak warned. Inflation in Germany has recently proved stubborn. According to preliminary estimates by the Federal Statistical Office, inflation in February will remain at a high level of 8.7 percent.
>> Read also: Volksbanken – Digital euro could cause difficulties for smaller banks
The high point of the price increase should have been overcome, said the BVR boss. “However, the inflationary impulse has spread from energy and food prices to the majority of the consumer price index and is clearly felt not only in the lower, but also in the middle income brackets.” She pointed out that inflation could be reinforced by higher wages .
Despite the inflation, the customers of the cooperative banks put aside more money overall last year. Customer deposits rose by a good three percent to 861 billion euros. However, growth was significantly below that of previous years.
Lending growth, on the other hand, almost matched the prior-year level. The loan portfolio climbed by almost seven percent to 757 billion euros and was driven by high volumes of private real estate loans until the summer. According to BVR board member Andreas Martin, demand has “cooled down noticeably”. “New business volumes in the fourth quarter are estimated to have decreased by approximately one-fifth compared to the third quarter of 2022.”
Number of ATMs decreases
In view of ongoing mergers, the average cooperative bank is getting bigger, with an average balance sheet total of 1.6 billion euros. Last year there were 35 mergers.
The Volks- und Raiffeisenbanken closed 562 branches, the number of branches fell to a good 7,500. The number of ATMs fell by almost 800 to around 15,500.
More: Why banks now want to do without thousands of ATMs