She largest bank in Europe’s most important economy is Deutsche Bank. Nevertheless, the comparison of the Frankfurt with the American competition is almost a joke. The American financial institution JP Morgan has earned almost eight billion euros in the past three months alone.
JP Morgan’s profit for the year as a whole was just under EUR 33 billion – that’s twice as much as that Deutsche Bank currently brings in market capitalization. The Frankfurt institute will not be able to present its figures until the end of January, but it is already clear that it made a loss last year due to the complex restructuring of the group. Again.
And German banks are also weak compared to other European countries. This is clear from current data from the European Central Bank (ECB). The monetary authorities have been overseeing the large institutions in the euro area since autumn 2014. There are currently 117 banks.
For example, the German institutions directly supervised by the central bank – including the Deutsche Bank, the Commerzbank and DZ Bank– in the first nine months of last year, it made just slightly more profit than the Greek institutes. According to the data, the cumulative surplus of 668.32 million euros was only around 12 million euros higher than the net profit of Hellas ’. According to ECB data, the large banks in France even achieved a profit of just under 23 billion euros in the first nine months of 2019, Italy’s major banks at least around 11 billion euros.
The combined return on equity (ROE) of the institutes in Germany was also only 0.4 percent. According to the ECB, this is the lowest value of all euro countries – by far. In France, on the other hand, the yield on the banks was 6.3 percent, 7.6 percent was reported for the financial houses in Italy, in Slovenia it was almost 12 percent and in Greece it was still three percent.
In addition, the German money houses are extremely inefficient. The costs devour more than 83 percent of the money raised. France and Luxembourg also do poorly, but at least get by with a good 70 percent. In the Netherlands, Estonia, Greece and Spain, the ratio of costs to income is in some cases well below 60 percent.
In global comparison, however, almost all banks in the euro area suffer from high costs. In addition, a comparison of the cost / income ratio over the past few years shows that these have worsened compared to 2009 in all countries under review. However, the cost problem of the institutes has increased even further. For many institutions in the euro area, the return on equity is below their cost of capital. The main reason for this is likely to be shrinking earnings due to the low interest rates and the fragmented home market.
US banks continue to expand their leadership position
In the first nine months of last year, the depreciation and administrative costs of many euro banks increased, so that overall profits fell by eight percent compared to the same period in the previous year to 66 billion euros.
Euro institutes have underperformed particularly compared to the US banks. The Wall Street houses are after that financial crisis succeeded more quickly in becoming profitable again.
This week they were able to further expand their global leadership position. They released their fourth quarter figures and presented billions of profits for the past year. The major American money houses together earned more than $ 100 billion. In addition to bond trading, they benefit from consumers who are willing to spend money, which has given them growth in the credit card and consumer credit business.
Morgan Stanley delivered a final spurt in the final quarter of 2019: Good business in investment banking and asset management brought the institute a surplus of $ 8.5 billion for the full year. JP Morgan reported the highest annual profit a US bank has ever made. The US giant showed its strength in almost all sectors. Only the net interest income declined by two percent. The trigger was the interest rate cuts by the US Federal Reserve.
The Citigroup managed an eight percent jump in profits to $ 19.4 billion. However, only the bond trading business went well, with the bank posting an increase of 49 percent. By contrast, turnover in share trading declined. The institute, led by Brian Corbat, cut jobs in the retail sector last year to cut costs.
However, some US houses had to cut back. Wells Fargo had to shoulder high legal costs again due to scandals, for example about fictitious accounts. The bank’s annual profit shrank 13 percent to $ 19.6 billion. The San Francisco Institute is the industry’s problem child.
At the investment bank Goldman Sachs In 2019, profit fell by around 20 percent year-on-year to seven billion euros. The bank also failed to meet analysts’ expectations. The main reason for the disappointing result was the threat of punishments due to the corruption and money laundering affair at the Malaysian sovereign wealth fund 1MDB. The bank had to increase its provisions significantly. Risk provision for lazy people loans was started up.
The financial giant was also struggling in investment banking, which includes advising and advising companies on takeovers and securities issues. In this division, which is actually one of the figureheads of Goldman Sachs applies, earnings fell by seven percent for the year as a whole. The problems in the division continued at the end of the year.
Even with the Bank of America the institute’s total income was lower than a year earlier because the retail business generated less due to a lower net interest income. Net income shrank four percent year-over-year from October to December, the bank in Charlotte, North Carolina said.
For the full year, the surplus decreased 2.5 percent to $ 27.4 billion. After deducting preferred dividends, approximately $ 26 billion of this was attributable to shareholders. The company did better than analysts expected.