Consolidation in banking sector continues

The consolidation process in the German banking sector continued in 2017. Over the course of the year, the overall number of credit institutions fell by 65 to 1,823. This corresponds to a 3.4% decline compared with a drop of 3.7% in 2016. 

“The challenging competitive environment and, above all, the protracted spell of low interest rates are making life hard for institutions and forcing them to make deep spending cuts,” said Bundesbank Executive Board member Joachim Wuermeling with regard to this development. “The pressure is therefore mounting for smaller and medium-sized banks, in particular, to pool their resources and enter into mergers.” 

All in all, 19 new openings and 84 closures were recorded. Of these closures, 57 (2016: 52) were attributable to mergers in the cooperative sector. The number of institutions in the cooperative bank sector thus fell to 919, representing a significant drop of 5.8%. In the savings bank sector, 13 (2016: 10) savings banks and 1 Landesbank each merged with a separate institution from the same banking group, leaving 390 savings banks and 8 Landesbanken remaining. The number of commercial banks rose by 9 to 390 institutions in 2017. Of these, 3 new openings and 6 closures were attributable to the “Regional and securities trading banks and other commercial banks” category, which comprised 186 institutions at the end of 2017. By contrast, with 16 new openings and only 4 closures, the number of institutions in the “Branches of foreign banks and securities trading banks” category increased to 200 (see Table 1).

Number of domestic branches falling sharply

The number of domestic branches[1] plummeted in 2017 by 1,900, or 5.9%, to 30,126, having fallen by 2,019 in the year before. The figure includes traditional branches and self-service terminals with access to staff for assistance Self-service terminals without access to staff for assistance are not included in the figure. “The decline in the number of branches isn’t just the result of cost pressure – it also reflects the trend towards digitalisation and the increasing use of online banking,” remarked Mr Wuermeling. 

A net decline in the number of branches was observed in nearly all sectors of the banking industry except among branches of foreign banks and mortgage banks. The greatest drop was once again recorded in the savings bank sector (including Landesbanken) – a fall of 765 to 10,174. However, with a share of 33.8%, this sector still has the largest number of domestic branches. 

As a result of the significant scaling-back of the branch network in the cooperative sector, the number of branches here fell by 714 to 9,455 (equating to a share of 31.4%), thereby falling below the 10,000 mark for the first time. 

Commercial banks, too, cut their number of branches significantly, lowering it by 402 to 9,042 (corresponding to an overall share of 30%). Despite scaling back their branch network by 185 branches, big banks still make up the lion’s share of commercial banks, with 6,800 branches. Regional banks expanded their branch networks to a comparatively large degree, with the number of their branches rising by 222 to 2,053. 

Branch numbers fell only slightly in the case of building and loan associations, with the number of private building and loan association branches falling by 11 to 856 and that of public building and loan association branches dipping by 4 to 529. The number of branches in the “Other institutions (excluding building and loan associations)” category stood at a mere 70 (see Table 2). 

Number of foreign subsidiaries and foreign branches down further

German credit institutions’ trend of maintaining a foreign presence continued to abate slightly across all banking groups in the year under review. As at the end of 2017, the number of subsidiaries[2] domiciled abroad had dwindled by around 5% from 145 to 138. The number of subsidiaries of German big banks throughout the world alone fell by 8 to 94, while regional banks boosted their foreign presence by opening 5 subsidiaries, taking the number to 21. 

In line with general developments, the number of foreign branches operated by German credit institutions fell by 10 to 224. 

Just over two-thirds of all foreign branches as well as slightly more than half of foreign subsidiaries are located in Europe, predominantly in member states of the European Union (see Table 3). This includes 26 foreign branches (2016: 27) and 9 foreign subsidiaries (2016: 10) located in the United Kingdom.

Footnotes

1. Branches pursuant to section 24(1a) number 4 of the German Banking Act. Branches that only provide automated banking or financial services are not included here.
2. Equity interest of more than 50% in a foreign credit institution