D.he German banks and savings banks have been thinning out their branch network for years. The pressure is increasing as more and more customers are using digital channels for their daily banking business, so that many branches are now almost deserted. According to Bundesbank figures, German credit institutions closed 1220 branches in 2019, and 2239 in 2018. At the end of 2019 there were 26667 bank branches in Germany. But in the Corona crisis, many customers who had remained loyal to their branches until then were forced to switch to online banking. And that lowers their inclination to visit branches.
Deutsche Bank and Commerzbank have already announced further closings. In addition to digitization, the low interest rates are forcing action because they are depressing the earnings situation in private customer business, as a current study by the consulting company Zeb shows. The earnings potential in this area fell by 2 percent to 49.3 billion euros last year. In the current year it will melt to 47 billion euros according to the forecast of the Zeb consultants. That would then be 16 percent less than in 2010.
If the Baken und Sparkassen could at least achieve a “black zero” in the private customer business in 2019, the Zeb partners Ulrich Hoyer and Marc Buermeyer expect a loss of 3 billion euros this year. Without countermeasures, including cost savings through branch closings and downsizing, they expect a loss of 5 to 7 billion euros over the next five years.
There are also bright spots
If the banks in this business area aim for a return on equity of 6 percent, cost savings of around 22 percent will be necessary by 2024, according to Hoyer. 14 percent would be required for a “black zero”. However, the Zeb consultants also recognize bright spots that, in addition to cost savings, offer profit opportunities. At the forefront are banking transactions via smartphone. In their opinion, so-called mobile banking will develop into the primary customer contact point.
The banks must pay attention to simple and convenient application options with value-added offers if they want to raise earnings potential. The scope for increasing account fees is limited. However, the banks could offer incentives to use higher-priced and higher-value packages, so-called premium packages. The topic of sustainability also opens up earnings opportunities in the private customer business.
The increased affinity of the population for sustainability is reflected not only in everyday life, but also in finances and leads to both an increased demand for sustainable products and services and an increased willingness to pay for them. In the medium term, Hoyer and Buermeyer expect additional income opportunities in the private customer business of around 1.6 billion euros. “Banks must systematically cope with market pressure and accelerate the transformation into digital and sustainable business models,” is their recommendation.