Deutsche Bank Dwarfed by Local Lenders Making Billions

(Bloomberg) -- Germany’s regional lenders are eclipsing their listed rivals Deutsche Bank AG and Commerzbank AG with billions of euros in profits.

The country’s 875 cooperative banks earned 2.2 billion euros ($2.5 billions) after taxes last year, the group’s industry association said on Tuesday. At the same time, Germany’s 384 savings banks reported combined net income of 2.2 billion euros as well. The members of both banking groups are nominally independent and usually avoid encroaching on one another’s territory.

Their two listed Frankfurt-based rivals did not make the jump over the 1 billion euro mark in 2018. Commerzbank posted a net result attributable to its shareholders of 865 million euros, while Deutsche Bank reported a net income after minority interests of 267 million euros.

The weak full-year results might explain why Deutsche Bank and Commerzbank are edging closer to a merger. Less than a year after taking over, Deutsche Bank Chief Executive Officer Christian Sewing is still struggling to reverse a long slide in revenue amid a slowdown in the economy that’s delaying a return to more normal interest rates.

Mergers are already in full swing at Germany’s savings banks and cooperative banks. For example, the number of cooperative banks fell by 40 last year, its association said on Tuesday.

“The need for consolidation in the German banking industry is likely to have risen further," Dusseldorf-based Barkow Consulting said last week. "In addition to the burden posed by the ECB’s zero interest rate policy, this is being sustained by persistent cost pressure, which continues to emanate from the high to very high need for renewal in IT."

To contact the reporter on this story: Stephan Kahl in Frankfurt at skahl@bloomberg.net

To contact the editor responsible for this story: Erhard Krasny at ekrasny@bloomberg.net

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