The cooperative banks saw above-average growth in their customer business: The volume of lending rose by 4.5 percent to €528 billion, whereas the lending volume in the sector as a whole increased by 2.7 percent. Deposits from customers totaled €637 billion. The year-on-year increase of 4.8 percent for the local cooperative banks was far higher than the market growth rate of 3.1 percent.
"The cooperative banks are maintaining their growth trajectory in the customer business and achieving impressive market success. Last year, the local cooperative banks again showed themselves to be robust and profitable," explains Uwe Fröhlich, President of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) [National Association of German Cooperative Banks].
The local cooperative banks further strengthened their capital base in order to cushion future risks and pave the way for the continued expansion of business with retail and corporate customers. This strengthening included substantially increasing their Tier 1 capital, which reached €67.4 billion. They are thus well equipped to meet regulatory capital requirements.
Following 49 mergers during the year, the number of cooperative banks in Germany was below 1,000 for the first time as at December 31, 2016 – as had been expected – and stood at 972 institutions. There were a total of 11,787 branches as at the reporting date. The cooperative business model continues to be based primarily on a network of local bank branches, combined with a high-performance omnichannel presence that enables customers to choose how to access their cooperative bank. The increase in the number of cooperative members was 152,000, bringing the total to 18.4 million.
Criticism of parallel surveys from the regulators
The BVR President is highly critical of two surveys – on the low-interest-rate environment and on profitability – being launched by the European and German banking regulators simultaneously in April. The surveys require extensive amounts of data to be collected, some of which will be new data. Furthermore, which data is required has not yet been finalized, even though the surveys start in two weeks. "The additional benefits for the regulators do not justify the large amount of effort required to collect the data," says Fröhlich. Moreover, he adds, comparable national initiatives to collect such data are not taking place in other European countries. However, he emphatically supports the regulators' objective of ensuring the stability of financial markets. Given the high level of manual work required to ascertain the key figures to be reported, the BVR estimates that the total costs for all the cooperative banks together will be in the double-digit millions.
Market success in the customer business
The volume of lending by the local cooperative banks amounted to €528 billion. Lending to retail customers rose by 4.1 percent to €274 billion, with market share increasing to 23.9 percent. There was also strong growth in the volume of corporate customer loans, which climbed by 4.7 percent to €230 billion. The share of this market increased to 19 percent.
The cooperative banks' deposit-taking business also saw steady growth. As a result of low interest rates, however, the breakdown by deposit type reveals a mixed picture. Liquid, short-dated deposits proved popular but longer-dated, less liquid deposits declined: Sight deposits grew by a substantial 9.6 percent to reach €395 billion. However, there was less demand for time deposits, savings deposits, and savings certificates. Total deposits from customers were up by 4.8 percent to €637 billion. Market share improved slightly, reaching 18 percent. The aggregated total assets of the cooperative banks amounted to €851 billion.
Good level of income; sound capital adequacy
Last year, net interest income fell by 3.5 percent to €16.5 billion. Net fee and commission income held steady at €4.6 billion. General and administrative expenses decreased by 0.8 percent to €14.4 billion, with staff expenses reducing by 1.1 percent to €8.7 billion. The cooperative banks employed 151,550 people.
According to preliminary figures, operating profit before gains and losses on valuation declined by 3.9 percent to €7 billion. Operating profit including gains and losses on valuation totaled €6.5 billion, a decrease of 4.8 percent. The balance of other income and expenses and of extraordinary income and expenses came to a net amount of €300 million. Preliminary net income for the year before taxes increased by 2.2 percent to €6.8 billion. Income taxes paid came to €2.2 billion, compared with €2.1 billion in 2015. The banks are expected to have transferred a sum of €3 billion to the fund for general banking risks, thereby strengthening their already sound capital adequacy. Net income for the year after taxes and after this addition to reserves stood at €1.7 billion (2015: €1.4 billion).