Savings Banks have a comfortable capital buffer to tackle future burdens
10.03.2021 - Press release Nr. 07
Germany’s Savings Banks emerged from coronavirus year 2020 in robust financial health. In addition to the coronavirus pandemic, negative market rates continued to place a considerable burden on credit institutions. In 2020, net interest income fell by 3.3 percent, which was EUR 662 million less than in the previous year. The decline would have been even more significant without the excellent home savings and loan business.
“The coronavirus will go away at some point; however, extremely low or even negative interest rates will stay. For this reason, net interest income will continue to decline in the next few years. Savings Banks will need to adopt countermeasures: By cutting costs, by stepping up their commissions business, and possibly also by adjusting their terms and conditions”, said Helmut Schleweis, President of the German Savings Banks Association (DSGV), who presented the financials of the Savings Banks Finance Group for coronavirus year 2020 at today’s DSGV press conference.
Schleweis called on the ECB to significantly raise the exemption threshold for excess deposits. In 2020, Savings Banks had to pay approx. EUR 120 million in punitive interest to the ECB. With the current volume of deposits, this amount was set to double in 2021.
”Savings Banks achieved major success in their customer business in 2020. However, less and less remains because of the negative market interest rates. In the current circumstances, Savings Banks proved to be robust as they went through the year 2020. They have the strength to master the challenges ahead of us and to provide reliable support to their customers”, said DSGV President Helmut Schleweis.
Overall, Germany’s 376 Savings Banks achieved EUR 4.1 billion in earnings before taxes in 2020, which is EUR 145 million less than in 2019. EUR 2.7 billion will be transferred to contingency reserves, and EUR 2.5 billion will be paid in taxes. DSGV President Helmut Schleweis noted that the Savings Banks’ performance was very respectable compared to their competitors.
At the end of 2020, the Savings Banks’ regulatory capital amounted to EUR 133.2 billion, which was EUR 5.3 billion more than in the previous year. The total capital ratio amounted to 17.55 percent at the end of 2020; the tier-1 ratio amounted to 16.42 percent, and the common equity tier-1 ratio amounted to 16.40 percent. The regulatory requirements were therefore significantly exceeded.