According to the most recent issue of the Bundesbank’s Monthly Report, German credit institutions recorded a strong improvement in performance in 2021 compared with the year before. Profit for the financial year before tax was up €12.8 billion, hitting almost double the previous year’s figure at €27.1 billion – a development which the report primarily attributes to the fact that banks significantly scaled back their risk provisioning compared with 2020 and also released some of the risk provisions that they had formed that year. However, the current year could see the profitability of German banks dampened, in particular, by the repercussions of the Russian war of aggression on Ukraine. The report explains that this might increasingly impair economic growth, which would increase the likelihood of credit losses.

German economic output is likely to contract somewhat in the third quarter of 2023, the Bundesbank writes in its Monthly Report. It is unlikely that private consumption will offer any discernible positive impetus. Households are still reluctant to spend despite the slight easing in price inflation, strong wage growth and favourable labour market. In addition, weak industry is weighing on economic output. 

German credit institutions’ performance tended to deteriorate in 2022, Bundesbank experts write in the current issue of the Monthly Report. Profit for the financial year before tax did manage to creep up on the whole and, at €27.4 billion, remained well above the long-term average. However, this was driven mainly by a one-off effect at one institution. According to the Bundesbank, most categories of banks recorded significantly lower annual profit for the reporting year than in 2021.