Times are tough for German banks. A negative interest rate environment, coupled with generally high cost-to-income ratios, has dented profitability across the sector in recent years.
This has contributed to plunging share prices, while raising question marks over the long-term health of the banking sector in Europe’s largest economy. The Banker’s Top 1000 World Banks Ranking 2020 clearly exposes these challenges, while also revealing the banks that have bucked these trends to post relatively strong growth numbers.
Topping the ranking of best-performing banks in Germany, for instance, is Norddeutsche Landesbank (NordLB), with an overall performance score of 6.50 out of 10. Though it is the country’s eighth largest bank based on Tier 1 capital, the bank secured first place in four constituent performance categories: profitability, operational efficiency, asset quality and return on risk.
It is worth nothing that the bank’s profitability score, which came in at 7.27, was significantly higher than most of the other best performing lenders. Six out of the 10 featured banks achieved profitability scores below 5.
The second best performing lender was Wüstenrot & Württemburgische, with a score of 5.99. Though it was among the worst-performing banks in terms of growth and operational efficiency, it nevertheless performed well in terms of liquidity, asset quality and return on risk. The bank also scored relatively well for profitability with a score of 5.58, placing it in third position. It is notable that Wüstenrot & Württemburgische is Germany’s 11th largest bank by Tier 1 capital, highlighting that the two top spots went to relatively smaller lenders.
Among the country’s biggest banks, Commerzbank, which is number two in terms of its Tier 1 capital position, achieved fourth place in the best performing ranking with a score of 5.62. This was largely due to its strong showing in soundness and leverage, where the bank topped both performance categories. However, it scored poorly in the asset quality and return on risk metrics, coming seventh and eighth respectively.
Meanwhile, Deutsche Bank, Germany’s largest lender by Tier 1 capital, landed in 10th place on the best-performing ranking with a score of 3.20. This performance reflects many of the troubles the bank has faced in recent times. Though it scored poorly relative to its peers, it still achieved a strong result in the liquidity category, coming second overall with a score of 8.45.
