Even for German banks the knots are coming to a head. In particular, on local commercial institutions – cooperatives and savings banks – the ax of Standard & Poor’s is knocked down, indicating that they are weakening. Not so much for the quality of their assets or for the capitalization “which will probably remain robust, supported by the reactivity of the German economy to covid”. The point, according to analysts from the leading rating agency, is that the pandemic “has exacerbated the challenges facing the German banking system.” Now these institutions “are less competitive than their global competitors due to slow progress in improving revenue diversification, cost structure and digitization.”
The result thus developed into a series of “downgrades”, as they say in the jargon, that is the lowering – in this case by one step – of the judgment on the creditworthiness of institutions in the cooperative sector such as Dz Bank, Dvb Bank, R + V Versicherung, Apobank, savings banks with DekaBank, banks with local networks such as Helaba. In short, those important networks of commercial banks in the area which together account for 50% of German deposits.
Germany’s banking sector has long been in the sights of S&P. The myth of their solidity does not waver, but the myth of their ability to react to low interest rates and the revolution of fintech, the financial technology that is changing the relationship between customers and banks in many cases, does not falter. Profitability with the pandemic has deteriorated. The return on capital has gone from 4% in 2019 to 2% in 2020. Now the agency’s forecasts for 2021-2023 identify it between 3 and 4%. “This suggests that German banks are struggling to cover their cost of capital,” reads the report that accompanied the creditworthiness decisions. Not only that: their model of territorial bank spread throughout the territory with a decentralized structure “slows down the development of technology and makes it difficult to achieve a generalized cost cut”. All this in a highly competitive market, the German one, which now has to deal with the new players in the technological revolution that first of all involves basic banking services.