The number of German banks has been declining for years. One lender that is fueling this trend is located right in the country’s financial capital.
Frankfurter Volksbank eG has merged with 19 other lenders since 1990 and is now one of the largest cooperative banks in Germany. This year alone, it is integrating two lenders that were previously independent. CEO Eva Wunsch-Weber, who once started her career at neighboring Deutsche Bank AG, believes that consolidation in the industry is far from over.
“The number of cooperative banks will continue to decline in Germany,” she told Bloomberg in an interview. There is tough competition in the industry, especially in Frankfurt, she added. In her view, mergers make lenders more efficient and stronger.
This year, Frankfurter Volksbank is combining with Volksbank Griesheim eG and Vereinigte Volksbank Maingau eG. All in all, this leads to 1,700 employees and more than 600,000 customers as well as a balance sheet total of around 11.6 billion euros and a core capital ratio of 19.7 percent.
The three-way merger showcases consolidation in the German banking industry. In 2017 alone, the number of lenders fell by a total of 65 to 1823, figures published by Deutsche Bundesbank show.
The trend does not come as a surprise to industry experts. “The number of banks is falling because regulation makes it increasingly difficult for small lenders to assert themselves. For example, they need specialists for a variety of regulatory reports who do not exist everywhere and who are expensive,” according to Steffen Steudel, spokesman for the National Association of German Cooperative Banks (BVR).
Wunsch-Weber is confirming that indirectly. “Regulatory reporting is just one area where we have increased staffing levels,” she said. That leads to extra financial overhead. “We have stopped calculating the exact regulatory costs.” Nonetheless, she has a message to regulators: “We would wish that bank size and risk would be taken more into account in the guidelines.”
No Layoffs in 156 Years
So far this year, Frankfurter Volksbank has hired about 50 employees. These figures include specialists, for example in the areas of taxes, legal and risk.
There will be no layoffs at Frankfurter Volksbank as a result of the current mergers, even though the number of jobs will shrink in the next few years due to retirements and not filling vacancies, according to the bank. “During mergers, we provide an employment guarantee of five years,” Wunsch-Weber said. “In our 156-year-old history, we have never cut jobs for operational reasons.”
When it comes to finding talent, Wunsch-Weber sees both advantages and disadvantages in being located in Frankfurt. Although there are many talented employees in the German financial capital, there is fierce competition for them, she said. However, after all, she is happy about the bank’s location. “In Frankfurt, you get an early grasp of trends in the industry,” she said.
Brexit Making Hiring Difficult
The search for employees is not expected to get any easier in the future. Many lenders want to relocate part of their activities from London to Frankfurt because of the upcoming Brexit. “The 20 financial service providers that will relocate business due to Brexit will create approximately 3,000 to 5,000 new jobs in Frankfurt over the next two years”, according to Oliver Wagner, Managing Director of the Association of Foreign Banks in Germany.
In addition to traditional retail banking, Frankfurter Volksbank is also active in asset management. This part of the business is aimed at individuals who want to invest at least 250,000 euros. “In this area, we see double-digit growth rates in terms of mandates and assets under management each year,” Wunsch-Weber said. The number of employees in this area now stands at 15.
Wunsch-Weber has been active in the financial industry for decades. After some time at Commerzbank AG, she moved on to Frankfurter Volksbank in 1993. Following other posts, she became CEO in 2012.
It does not make for conversation that she leads a bank as a woman, Wunsch-Weber said. “Frankfurt is characterized by great openness. We have had a very successful female mayor for a long time,” she added. “I am optimistic that we will see more women in leadership positions in this industry going forward.”