Germany's commercial banks are slowly seeing land again.

After the European Central Bank slowly began to signal a turnaround in interest rates, monetary policy remained critical, but it seems that it will be possible to come to terms with it until the end of the year.

The chairmen of the Association of Cooperatives - Association of Regions, Ingmar Rega and Siegfried Mehring, only addressed the low interest rates on the sidelines of their annual press conference, unlike in previous years.

Rather, the good news is a growth in deposits from the member institutions of the association of 6.6 percent to 410 billion euros and an increase of 6.9 percent to around 356 billion euros in the financing business.

Gregory Bruner

Editor in Business.

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Even with good business development, for many institutes there is no avoiding mergers.

There were 14 fewer banks in the association at the end of 2021.

As a result, the average balance sheet total increased from 1.5 to 1.7 billion euros.

In relation to this, the banks' net interest income is 1.58 percent, commission income is 0.68 percent and administrative expenses are 1.48 percent.

The operating result before valuation increased from EUR 4.2 billion in the previous year to EUR 4.7 billion in 2021;

the cost/income ratio was 64.3 percent, more than two percentage points lower than in 2020.

In addition to the business figures of the association, the results of the annual survey among the member institutes of the association were also presented.

The cooperative association has identified developments in construction financing as the main topic this year.

With the countercyclical capital buffer of 0.75 percent and the systemic risk buffer of 2 percent specifically for residential real estate loans, the banks will face two challenges this year.

The Federal Financial Supervisory Authority (Bafin) has ordered these additional capital buffers to be built up in order to make the banking sector more resilient to risks in the financial system.

Institutions such as Bafin and the European Council for Systemic Risks see an increased risk of a crisis in the residential real estate market in particular.

Home loans are getting more expensive

At 54 percent, the majority of the banks surveyed expect a strong to very strong increase in the cost of new lending.

43 percent expect a slight increase in price, and 2 percent expect the costs to remain the same.

The institutes consider high costs to be the greatest obstacle to home ownership.

96 percent name high construction costs as a stumbling block, 73 percent the high prices due to generally high demand.

Builders who have taken out their loan at low interest rates are initially protected from the more expensive loans.

But as soon as they need follow-up financing, they too will feel the cost increase.

73 percent of banks expect these to become more expensive.

At the same time, most credit unions are in a good position to provide residential real estate loans to customers.

86 percent expect only a minor impact of capital requirements on their ability to lend.

Overall, most institutes are relaxed about the risk.

However, a good 28 percent of the banks see a bubble forming on the real estate market within the next five years.

69 percent expect a low risk of blisters.

19 percent of the institutes in their region consider the supply of housing to be poor.

At the same time, however, there are doubts that the situation will improve to the extent that the government would like.

More than 90 percent consider the goal of building 400,000 new homes every year to be unrealistic.