The rapidly rising interest rates have boosted banks’ business. Many German banks are more successful than they have been for a long time. But some competitors earn significantly better.
The interest rate turnaround has dramatically improved the profitability of German banks – but according to an analysis, they are still lagging behind on the domestic market. With an average return on equity of 4 percent, German institutions would have significantly exceeded the previous year’s figures in 2022, the management consultancy McKinsey calculated in the analysis published today.
Institutions from abroad and specialists such as direct, consumer credit or car banks were significantly more profitable than the overall market, with an average return on equity of 10.4 percent. The return on equity puts the profit in relation to the equity capital used and therefore shows how efficiently a company has used this money.
Foreign banks and specialists were also able to expand their market share from 30 percent in 2010 to 40 percent now – especially in high-profit areas such as asset management or corporate loans.
“The lower profitability of German banks compared to international standards can only be attributed to the general conditions in the German market,” said the head of banking consulting at McKinsey in Germany and Austria, Max Flötotto. The local banking sector must use the scope gained from the recent good results to “invest in the future viability of business models and innovative strategies”.
This also applies to staff: 40 percent of employees at German banks are already older than 50. “By 2030, 30 percent of current staff are expected to leave for reasons of age. Banks will therefore also need to rethink their approach in order to get more staff ready for work again to attract, retain and develop in the banking industry,” advises McKinsey.