Savings Banks with lower operating result; Schleweis: “We have continued to strengthen our reserves”

Germany’s 378 Savings Banks will tackle the difficult coming months from a position of strength. “Our institutions closed the past year with net income after taxes of EUR 1.8 billion. Another EUR 4.1 billion was transferred to contingent reserves for difficult times,” said Helmut Schleweis, President of the German Savings Banks Association (DSGV), at the financial press conference held by the Savings Banks Finance Group today in Berlin. With a tier-1 ratio of 16.0 percent and a total capital ratio of 17.3 percent, Savings Banks display a very solid capital base overall.

Although Savings Banks closed their customer business at record level, their operating result had continued to decline because negative interest rates remained in place. Their net interest income decreased in 2019 by EUR 557 million to EUR 20.2 billion, which was a drop by 2.7 percent. Schleweis commented that “this pattern will continue. It is foreseeable that Savings Banks’ earnings will remain under pressure in the next few years. And this is still without factoring in the latest developments relating to the corona pandemic.”

Once again, however, Savings Banks had pitted all their strength against the challenging market environment and had done a very good job in their regions, said Schleweis. “This is borne out by improved net commission income, which increased by EUR 429 million. This is a very significant commercial success.”

In the past year, administrative expenses of the institutions rose by EUR 276 million to EUR 19.2 billion. The increase in personnel expenses by EUR 95 million was mainly due to collective pay rises of three percent for employees. Non-personnel expenses increased by EUR 181 million.
The operating result before valuation was EUR 372 million lower than in the previous year, amounting to EUR 9.6 billion as of year-end. At EUR 4.1 billion, valuation expenses decreased significantly by 10.5 percent. Loan loss provisions amounted to EUR 537 million. “While this is an increase compared with previous years, it is only one-fifth of the loan loss provisions posted by Savings Banks ten years ago. However, we can expect this factor to deteriorate significantly as of 2020 due to the corona pandemic.” Nevertheless, Savings Banks are well prepared for this period. Contingency reserves had been boosted once again by EUR 4.1 billion. Earnings before taxes fell by EUR 158 million to EUR 4.3 billion, of which EUR 2.5 billion was paid as taxes to the public purse.