Low rates hobble Germany’s public banks
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Low rates hobble Germany’s public banks

Germany’s public-sector banks are not meant to be profitable – they have a social function – but even though stresses will continue, savings banks have found ways to work with the Landesbanks.

Reflective mood: More than 900 Sparkassen branches closed in 2016

Reichenau am Bodensee, which lies about 10 kilometres west of Konstanz in southern Germany, is a pretty little town. It has an eighth-century Benedictine monastery, picturesque half-timbered houses and a handful of welcoming Gaststätten. And like every German town and city, it has its obligatory savings bank, Bezirkssparkasse Reichenau. 

With assets of a little over €1 billion at the end of 2016, deposits of just over €600 million, loans of €950 million and a workforce of 132 employees, Reichenau’s savings bank is hardly a global systemically important bank. But it is remarkable in one respect. According to one recent study, it is the most efficient savings bank, or Sparkassen, in Germany among those with a balance sheet of more than €300 million.

The survey of productivity among German and Austrian savings and cooperative banks was undertaken by Confidum, a Swiss financial management consultancy. Its managing director, Christof Grabher, says that in today’s interest rate environment, traditional measures of efficiency in the banking industry have lost their relevance. 

The most popular of these yardsticks is the cost-to-income ratio, which collectively hovers at over 60%. 

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