Number of German banks declines as fintechs attack

Bloomberg

Even before Bundesbank will publish its annual statistics on the consolidation in the German banking industry in May, there are already indications that the total number of banks and branches has dropped even further. Banks from abroad or those focussing on very specific customer groups are among the few that are expanding.
The number of savings and cooperative banks, which account for two of the traditional three pillars of Germany’s banking system, fell by around 5.1 percent to 1,305 in 2017, according to Bloomberg calculations. At the same time, the number of branches shrank by 6.4 percent to 20,976.
Data for the remaining banks, the third pillar, is not yet available. But there are indications. For example, in 2015 and 2016, Deutsche Bank AG had slightly more than 720 branches in Germany, including Berliner Bank, but excluding Postbank. At the end of 2017, there were just over 530, the company said.
“One of the main reasons for the closure of many branches is the increasing digitisation and new customer requirements,” Thomas Schnarr, a partner at the strategy consultancy Oliver Wyman GmbH, told Bloomberg News. “Especially small units may lack sufficient critical mass to adapt to the new environment.”
Steffen Steudel, spokesman for the National Association of German Cooperative Banks, also points to regulatory requirements: “The number of banks is falling because regulation makes it increasingly difficult for small institutes to assert themselves. For example, they need specialists for a variety of regulatory reports who do not exist everywhere and who are are expensive.”
At the same time, Oliver Wyman observes the emergence of a new fourth pillar, consisting of foreign banks and new market participants like fintechs, which further fuels |competition and attacks traditional business models.
Peter Barkow, Managing Director of the Duesseldorf-based consulting firm Barkow Consulting, sees it in a similar way: “The banks, which are expanding their presence in Ger-many against the trend, are usually special cases — such as foreign banks pushing into Germany.”
This is also reflected in the plans of some companies: Austria’s Oberbank AG intends to open eight new branches in Germany this year, located in the German states of Baden-Wuerttemberg and Saxony. “We think that the market potential in Germany is substantial,” CEO Franz Gasselsberger said. “The break-even point of our new locations is around 2 years on average.”
The company currently has 28 branches in Germany. The fintech side includes, amongst others, Hamburg-based FFG Finanzcheck Finanzportale GmbH, which has 225 employees and operates a loan comparison portal on the Internet. It has now opened a branch in its hometown. “We can well imagine other locations — nothing is yet definite, but if so, then it would be the downtown area of other major German cities,” CEO Moritz Thiele said.