The local cooperative banks continued along their successful trajectory in the lending business, which grew by 4.8 percent to €505 billion. Deposits increased by 4.5 percent to €608 billion. The aggregated total assets of all cooperative banks rose by 3.8 percent to €818 billion as at December 31, 2015. The net increase in the number of members was 258,000, bringing the total to 18.3 million.
Ahead of the upcoming meeting of the Governing Council of the European Central Bank (ECB), the President of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) [National Association of German Cooperative Banks], Uwe Fröhlich, called on the ECB to show more patience. "Short-term, knee-jerk monetary policy measures ultimately harm the ECB's reputation and the effectiveness of the instruments at their disposal," said Fröhlich. "The impression is that ECB President Mario Draghi is wielding monetary policy with a crowbar." The instruments of the ECB were virtually exhausted, Fröhlich added. Even the program of large-volume bond purchasing announced in January 2015 had not achieved much. "The monetary-policy floodgates have been opened so wide that an announcement about even more liquidity will no longer influence the mood in financial markets for very long," said Fröhlich. "The ECB would demonstrate more credibility if it showed a steady hand."
Regarding the current discussions in Brussels about the mutualization of European deposit guarantee systems, the BVR's Board of Managing Directors warned of the negative impact on the economy as a whole, saying that mutualization would enable member states to craftily transfer risks from their domestic banking sector and public finances to the European level. Given the high proportion of non-performing loans in many countries and the fact that domestic banking sectors continue to have large country-specific portfolios of government bonds, even a European protection fund could be quickly overwhelmed and the protection for savers in all countries would be at risk.
Market share gains
The German cooperative banks' lending to corporate customers (non-financial companies and self-employed people) advanced by 4.7 percent to €220 billion. Market share increased by 0.6 percentage points to 18.6 percent. Loans to retail customers were up by 4.8 percent year on year to €264 billion thanks to strong demand for long-term home finance. Market share rose by 0.4 percentage points to 23.7 percent. There was also substantial growth in customer deposits. The total deposits of the cooperative banks amounted to €608 billion, a year-on-year increase of €26 billion or 4.5 percent.
Consistently high earnings
Brisk customer business more than compensated for the decline in interest margins, which had been expected. The persistently low interest rates caused net interest income to fall by 0.4 percent to €17 billion, whereas net fee and commission income went up by 5.1 percent to €4.5 billion.
Administrative expenses increased by 2.9 percent to €14.6 billion. Staff expenses came to €8.9 billion, a rise of 3.7 percent. The number of employees decreased by 2.3 percent to 157,600. This reduction was almost entirely attributable to people leaving for age-related reasons. The cost/income ratio rose from 66.4 percent to 67.9 percent.
Partial operating profit, which is the profit from operating activities, dropped by 3.7 percent to €6.9 billion. Operating profit before valuation amounted to €7 billion, a decline of 4.4 percent. Net income for the year before taxes went down by 7.1 percent to €6.5 billion. Income taxes came to approximately €2 billion. The local cooperative banks also transferred a sum of €2.3 billion to the fund for general banking risks. This addition strengthened the institutions' already sound capital adequacy. Ultimately, net income for the year is thus likely to have decreased to €2.1 billion, a small year-on-year fall of 0.8 percent.