“The Volksbanken Raiffeisenbanken Cooperative Financial Network as a whole held up well in a year in which coronavirus made conditions difficult,” said Marija Kolak, President of the National Association of German Cooperative Banks (BVR). “The consolidated financial statements bear testament to how well the cooperative banks work in partnership with their central units such as the DZ BANK Group.”
Looking ahead to the parliamentary elections in Germany, Kolak called on policymakers to strengthen Germany’s medium-sized businesses, stressing that this sector’s entrepreneurial vigor was key to meeting future challenges. She warned against a culture of state interventionism, restraints, and a general mistrust of business. “It’s time to revive the social market economy,” Kolak said. “This includes having Germany as a strong financial hub. We will judge the new federal government to a large extent on what they do for our mid-sized business customers.”
The consolidated financial statements in detail
The annual consolidated financial statements of the Cooperative Financial Network, prepared in accordance with International Financial Reporting Standards (IFRS), provide information on the 2020 financial year of the 814 local cooperative banks, Sparda banks, PSD banks, and other specialized institutions in the cooperative financial network as well as the DZ BANK Group and Münchener Hypothekenbank.
At €18.4 billion, the Cooperative Financial Network’s consolidated net interest income in 2020 was slightly above the prior-year level in absolute terms, primarily due to further growth in the Real Estate Finance operating segment. Net fee and commission income rose by 4.9 percent to €7.4 billion and was mainly generated by the primary banks. On the investments side, there was particularly encouraging growth in fund- and securities-based saving. Payments processing also made a key contribution again.
Loss allowances of €2.3 billion were added in 2020. This increase on the figure of €0.8 billion for the prior year was due mainly to the anticipated economic impact of the pandemic. An adjustment of the probability of defaults based on modeling of the expected macroeconomic situation resulted in the bulk of the loss allowances, with a figure of €1.5 billion. The net realized loss allowances for the Cooperative Financial Network in 2020 of €0.8 billion was thus at the same level as in the prior year. This gives it a good buffer for 2021 based on the current assessment of the risk situation. Moreover, the number of defaults is now expected to be more moderate than had been anticipated at the turn of the year.
Thanks to rigorous cost management, total administrative expenses nudged down by 0.6 percent to €18.0 billion. At €10.1 billion, staff expenses were at almost exactly the same level as in the prior year.
Current taxes of €2.6 billion were paid in 2020. This considerable sum has boosted the coffers of local authorities, where the money can now be put to good effect after the strain on public finances caused by the pandemic. The Cooperative Financial Network’s consolidated net profit after taxes amounted to just over €5.0 billion (2019: €7.0 billion).
The lending business of the Cooperative Financial Network grew by 5.4 percent to €890.6 billion in 2020. This was again due mainly to robust customer demand, including in the form of COVID-19 support loan referrals. On the equity and liabilities side of the balance sheet, the deposit-taking business expanded by 6.5 percent to €937.9 billion in 2020. This is a stronger increase than the rise of 4.5 percent achieved in 2019 and was attributable to customers being able to save more money last year because of the pandemic-related restrictions. At €1,476 billion, the consolidated balance sheet for 2020 was 6.6 percent larger than at the end of the prior year.
Equity rose by 5 percent to €121.8 billion. Despite the pandemic, the regulatory Tier 1 capital ratio including the reserves in accordance with section 340f of the German Commercial Code (HGB) rose by 0.6 percentage points to 16.1 percent. The leverage ratio was also up by 0.6 percentage points, rising to 8.4 percent. This sound capital base makes the Cooperative Financial Network the most highly rated private banking group in Germany in the eyes of the rating agencies Fitch and Standard & Poor’s (S&P). Fitch recently confirmed the group’s AA- credit rating and raised its outlook assessment to ‘stable’. S&P rates the Cooperative Financial Network as A+ with a stable outlook.
Background information about the Volksbanken Raiffeisenbanken Cooperative Financial Network:
The local cooperative banks, Sparda banks, PSD banks, the cooperative church banks, and the specialized institutions hold virtually all of the capital of the Cooperative Financial Network – including that of the central institution, DZ BANK AG. They have more than 30 million customers, 18.4 million of whom are members of the local cooperative banks and thus their shareholders. The ownership structure of the cooperative banking group is therefore very broad and the group is entirely in private hands.
The central institution and specialized service providers within the Cooperative Financial Network, which include Bausparkasse Schwäbisch Hall AG, DZ HYP AG, Union Asset Management Holding AG, and R+V Versicherung AG as well as Münchener Hypothekenbank eG, VR Smart Finanz, TeamBank AG Nürnberg, and DZ PRIVATBANK S.A., provide the local cooperative banks with financial products and services, from which each cooperative bank compiles a package that is tailored to its positioning in the market and meets the needs of its customers. The BVR is the strategic competence center of the cooperative banking group. As an umbrella organization for the banking sector, it represents the interests of the cooperative banking group at both national and international levels.
The BVR also operates a dual system of bank protection. Its wholly owned subsidiary, BVR Institutssicherung GmbH, has been officially recognized as a deposit insurance scheme and, in addition to protecting banks, fulfills the statutory remit of ensuring depositors affected by a bank’s insolvency are compensated in accordance with national deposit insurance legislation. The BVR protection scheme is an additional, voluntary system that also guarantees that deposits are safe by protecting the banks.