At a glance:

• Customer business better than expected: rise in net interest income and in net fee and commission income
• Equity and reserves further strengthened
• Fair value gains and losses at expected level
• Systematic refinement of institutional protection and the BVR protection scheme
• Politicians heading in a very risky direction with new debt and no cost-cutting or structural reforms

“The cooperative banking group once again generated strong results for the year and is operating very profitably,” says Marija Kolak, President of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) [National Association of German Cooperative Banks]. “The figures underline the reliability and great success with which the Boards of Managing Directors, the Supervisory Boards, and the employees in our local cooperative banks are working for their customers and members.”

When the results were presented, Kolak emphasized that the cooperative sector will systematically adapt to the changes in the economic environment, market situation, and customer expectations. As part of this, the institutional protection scheme will be refined so that it is even better placed to prevent any potential adverse trends at individual cooperative banks. “Our institutional protection scheme is exceptionally strong. To ensure that this remains the case, we will refine it and, in doing so, incorporate what we have learned from the restructuring cases that arose last year.”

With regard to the current negotiations between the CDU/CSU and SPD parties on establishing a coalition to form Germany’s next government, Kolak stressed that a far-reaching agenda of reforms is essential in order to put the German economy back on a sure footing.

“In the current situation, it is understandable that the CDU/CSU and SPD want to increase debt levels as a way of investing in infrastructure and the defense capability,” explains Kolak. “But massively ramping up debt with no mention of the necessary savings and fundamental structural reforms is incredibly risky. This is not a responsible policy approach.” The joint paper published by the CDU/CSU and SPD following exploratory talks is extremely vague on this matter too.

Results for 2024 make up for the rise in interest expense
The customer business of the cooperative banks fared better than expected, even though the economy remains sluggish and inflation is still high. Lending and deposit volumes went up in 2024: Loans and advances rose by 2.6 percent to €797 billion while customer deposits swelled by 3.7 percent to €892 billion. Reflecting the encouraging performance of the customer business, the local cooperative banks also increased their income last year. Net interest income climbed by 0.8 percent to €20.5 billion, with interest income going up by 18.4 percent and interest expense going up by 66 percent. Net fee and commission income rose by 3.9 percent to €6.5 billion. As in previous years, the largest share of net fee and commission income was attributable to payments processing, followed by intermediary business and securities business. General and administrative expenses advanced by 2.2 percent in the reporting period. This included a 1.7 percent increase in staff expenses that was primarily due to collectively negotiated pay rises at the cooperative banks. The number of employees in the cooperative sector went up by 1.1 percent to 136,950. The growth in the number of trainees and highly qualified skilled workers is particularly encouraging and shows that the cooperative banks are an employer of choice. The ratio of trainees to other employees increased from 6.9 percent in 2023 to 7.2 percent in 2024.

Operating income went up by 0.4 percent to €10 billion. The cost/income ratio stood at 63.2 percent, compared with 62.9 percent in the previous year. Operating profit before gains and losses on valuation rose to €11.3 billion in 2024, while fair value gains and losses came to a net loss of €1.7 billion. Additional reserves pursuant to section 340f of the German Commercial Code (HGB) were recognized in an amount of €0.2 billion. Fair value gains and losses in own-account securities business came to a net gain of €0.7 billion, due in large part to reversals of write-downs and recoveries in the value of own-account investments in securities.

The equity reported on the cooperative banks’ balance sheets advanced by €2.1 billion, or 3.2 percent, to €66 billion as at December 31, 2024. Reserves swelled by 3.1 percent to €48 billion, while cooperative shares – i.e. subscribed capital – grew by 3.8 percent to €18 billion. Regulatory own funds climbed by 6.2 percent to €118.4 billion. As a result, the total capital ratio increased by 0.75 percentage points to 17.64 percent.

Profit before taxes rose by 2.3 percent to €9.5 billion. A sum of €4.6 billion is likely to be transferred to the fund for general banking risks. This means that, over the past five years, the institutions have recognized a total of €16.7 billion in new reserves in order to provide a cushion against possible risks. Taxes of €2.7 billion were paid, giving a likely profit after taxes of €2.1 billion.