Further fall in the number of credit institutions and branches – Banking operations and, in particular, lending in the context of providing coronavirus aid are ensured despite the current pandemic – Self-service terminals and cash machines are cushioning the effects of temporary branch closures

The consolidation process in the German banking sector continued in 2019. Over the course of the year, the overall number of credit institutions fell by 66 to 1,717. This corresponds to a 3.7% decline, compared with a drop of 2.2% in 2018.

While the fall in the number of institutions in 2018 was slowed down somewhat as a result of international banks relocating in anticipation of Brexit, in 2019 numerous closures and conversions of branches of British securities trading banks intensified the downward trend.

“The consolidation process in the German banking sector and the downsizing of the branch network continued in 2019. This shows that banks are actively responding to tough competition and changes in customer behaviour,” said Bundesbank Executive Board member Professor Joachim Wuermeling of the development. “This process is necessary for economic reasons,” he added.

At the same time, Mr Wuermeling is pleased that banking operations are ensured despite the current pandemic. “Contingency plans have proved to be effective. Even if banks temporarily close individual branches, banking services are still available to customers in the form of self-service terminals and ATMs,” said Mr Wuermeling, noting that it is especially important for banks to also be in a position operationally to play their role in supplying credit to the economy in the context of providing coronavirus aid. Mr Wuermeling added that, as regards banking supervision, a number of administrative burdens had been reduced for the duration of the crisis period.

In 2019, there were 24 additions and 90 departures across all credit institutions. Of these departures, 34 (2018: 40) were attributable to mergers in the cooperative sector. The number of cooperative institutions thus fell to 845, representing a drop of 3.9%. In the savings banks sector, mergers caused the number of institutions to fall by 6 (2018: 5), leaving 380 savings banks alongside 6 Landesbanken (the number of which did not change). In 2019, the number of commercial banks fell by 24 in net terms to 374 institutions. This was largely attributable to institutions in the “Branches of foreign banks and securities trading banks” category, which saw their numbers diminish by 26 to 185. There were 13 additions and 40 departures in this category, of which 37 departures were attributable to branches of British institutions (see Table 1). By contrast, there was a slight net increase in the “Regional and securities trading banks and other commercial banks” category, which went up by 3 at the end of 2019 to likewise comprise 185 institutions.

Number of domestic branches down again sharply

The number of domestic branches[1] plummeted again in 2019, falling by 1,220, or 4.4 %, to 26,667, following an even greater decline of 2,239 branches the year before. The figure includes traditional branches and facilities with self-service terminals and additional access to staff for assistance. Self-service terminals without such access are not included in the figure. This development reflects the impact of digitalisation on distribution channels due to greater use of online services as well as cost-cutting measures made necessary by the competitive environment.

A net decline in the number of branches was observed in all sectors of the banking industry. A particularly significant drop was once again recorded in the savings bank sector (including Landesbanken), where the number of branches fell by 525 to 9,207. However, with a share of 34.5%, this sector still has the largest number of domestic branches.

In the cooperative sector, the number of branches fell by 471 to 8,484 (share of domestic branches: 31.8%).

Commercial banks cut their branch numbers by 137 (-1.8%) to 7,633, compared with a reduction of 1,272 (-14.1%) in 2018. They thus accounted for 28.6% of all branches. With 6,219 branches (-79; 2018: -522), big banks still have the largest share of all commercial bank branches. The regional banks’ branch network was cut by 63 branches (-4.8%), leaving 1,240.

The building and loan association sector also saw a contraction in branch numbers, with the number of private building and loan association branches falling by 69 to 803 and that of public building and loan association branches dipping by 10 to 475. The number of branches in the “Other” category (excluding building and loan associations) stood at 65 (see Table 2).

Considerably more foreign branches in the wake of Brexit preparations

At the end of 2019, the number of subsidiaries[2] of German banks domiciled abroad had fallen from 97 to 92. The number of subsidiaries of German big banks remained relatively constant at 67 (-1), while regional banks reduced their foreign presence, taking the number of their subsidiaries down by 4 to 11.

By contrast, the number of branches of German credit institutions abroad rose significantly last year by 25 to 251 (+11.1%). This increase is connected to preparations for Brexit, which saw some international banks relocate their European headquarters to Germany and open branches, primarily in other European countries. Nearly three-quarters of all foreign branches as well as just under half of foreign subsidiaries are located in Europe, mainly in EU Member States (see Table 3). As at year-end 2019, this includes 29 foreign branches (2018: 27) and 5 foreign subsidiaries (2018: 6) located in the United Kingdom.

Footenotes:

1. Branches pursuant to Section 24(1a) number 4 of the German Banking Act. Branches that only provide automated banking or financial services are not included here.
2. Equity interest of more than 50% in a foreign credit institution.