The sharp turnaround in interest rates is also becoming a challenge for the German savings banks. Their profit fell slightly last year.
In total, Germany’s savings banks earned less in 2022 than a year earlier due to billions in write-downs on securities holdings. According to preliminary figures, the institutes had an annual surplus of around 1.5 billion euros after a good 1.6 billion euros a year earlier, as the German Savings Banks and Giro Association (DSGV) announced on Tuesday.
“The current turnaround in interest rates is economically challenging in the short term, but the savings banks have enough substance to deal with it quickly,” said DSGV President Helmut Schleweis in Frankfurt. Savings banks have been demanding an end to the zero and negative interest rate policy of the European Central Bank (ECB) for years. However, the rapid increase in interest rates since the summer has led to price losses on the markets, for example for government bonds, which make up a large part of the savings banks’ own investments. The result: the institutes had to write off almost eight billion euros on fixed-income securities.
Schleweis stressed that this was not a cause for concern: “If the securities are held to maturity, they will be repaid 100 percent and make up for the value corrections that have occurred in the meantime. We expect that this will be the norm at savings banks.”
On the other hand, rising interest rates ensure higher returns. Net interest income – i.e. the difference between what the institutes collect for loans on the one hand and what their customers pay their customers as savings interest on the other – increased by 9.2 percent to 21 billion euros at the savings banks within a year. “We expect this positive development to continue in the coming years,” said Schleweis. Then there will be more scope for higher interest rates on savings.
Source: Stern
