18,025,000 members now hold shares in cooperative banks, thereby ensuring that they have a say in how their local bank is run. The number of members of local cooperative banks had therefore topped yet another million by the end of 2014. 1.8 million new members have joined since 2008. "This represents a huge vote of confidence in the cooperative business model," commented Uwe Fröhlich, President of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) [National Association of German Cooperative Banks].
In view of the fact that German companies already have ready access to funding and that lending in the eurozone is expected to start rising again, Fröhlich warned of the dangers of adopting a one-size-fits-all approach to introducing a capital markets union in Europe. "Anyone looking to remove obstacles to financing in the capital markets must also ensure that banks can continue to perform their role of providing funding for business to the best of their ability. What we need is not so much a capital markets union as a campaign to support small and medium-sized enterprises," argued Fröhlich, "because banks that finance SMEs desperately need more freedom and less regulation in order to ensure that they can continue to supply credit to the real economy." Initiatives such as the Basel Committee's plans to abolish the reliefs and exemptions granted to medium-sized firms under the Standardized Approach to credit risk would make SME funding much more expensive and would need to be critically examined as part of any capital markets union.
Fröhlich suggested that a major reason why bank customers in Germany had easy access to credit was the mix of private-sector banks, public-sector savings banks and cooperative banks, which all compete vigorously against each other, adding that this beneficial situation for customers should not be put at risk.
Winning market share in customer business
Last year once again saw buoyant levels of customer business, with the cooperative banks winning market share in both lending and deposit-taking. The volume of loans that they had extended to corporate and retail customers grew by 4.3 percent – or €20 billion – to €482 billion. The market as a whole increased by only 1.0 percent during the reporting period. Cooperative banks' market share expanded accordingly by 0.5 percentage points to 15.4 percent. Customer deposits grew by 3.7 percent – or €21 billion – to €582 billion over the same period despite stiff competition. Cooperative banks' market share here was 17.4 percent, which constituted a year-on-year increase of 0.4 percentage points.
The net interest income earned by the local cooperative banks improved by 1.9 percent during the reporting period to €17.2 billion. At the same time, net fee and commission income rose by more than €200 million to €4.4 billion. The cooperative banking group therefore once again managed to compensate for the narrower deposit-taking and lending margins resulting from persistently low interest rates by expanding its volumes of customer business. On the other hand, administrative expenses rose by 3.3 percent to €14.3 billion, with staff expenses increasing at the slightly faster rate of 4 percent to €8.6 billion. The number of employees fell slightly to 161,500. By contrast, the number of trainees grew by 200 to 12,550, which meant that the ratio of trainees to other employees climbed by 0.1 percentage points to 8.6 percent. The cost/income ratio rose by 0.5 percentage points to 66.4 percent.
Partial operating profit advanced by 1.1 percent to €7.3 billion. Operating profit before valuation came to €7.6 billion and thus remained virtually unchanged year on year. Although fair value gains and losses deteriorated in nominal terms to a net loss of €150 million, their composition was affected byallocations of provision reserves in accordance with § 340f of German Commercial Code (HGB). The total operating profit for 2014 after valuation decreased by €500 million year on year to €7.4 billion. Net income for the year before taxes is expected to be €7.3 billion. Income taxes amounted to €2.1 billion.