An unusual time is coming to an end for the banks. Due in part to the many government support measures during the Corona pandemic, there were hardly any loan defaults for many years. The banks were even able to release previously created risk provisions. But now the need for risk provisions is increasing, considerably at Landesbank Hessen-Thüringen (Helaba) and gradually at most other credit institutions.
As far as can be seen, all German banks are able to cushion the growing risks well with their equity cushions and reserves. However, there may be greater concern about their risk culture.
After real estate financing, more corporate loans are now in jeopardy
The first warning shot came last year when large parts of René Benko’s Signa real estate group went into trouble and subsequently went bankrupt. The fall in prices on the US commercial real estate market also forced banks such as Deutsche Pfandbriefbank and Deutsche Bank to make large provisions. Now the spotlight is on loans for companies. Smaller businesses in particular are suffering from the weak economy in Germany. They cannot “just like that” invest abroad, as larger companies often do in this country, for example because of the high energy prices. The number of company bankruptcies is rising – back to normal levels. After all, failure is also part of the market economy.
Many banks, however, are no longer familiar with the failure of their customers. There are fewer and fewer “marketing and sales people” on the executive floors, and more and more former management consultants are making it onto the banks’ boards. They are used to thinking in terms of processes. In doing so, they could lose sight of the true credit risks.
This impression could already be gained at Signa, when Helaba, for example, reached a mid-three-digit million loan volume with several financings – quite a lot for a public bank owned by federal states and savings banks. Questions are now being raised about the creditor banks of the ailing agricultural group Baywa, whose failed expansion was financed by DZ Bank, LBBW, Hypo-Vereinsbank, Deutsche Bank and Commerzbank. Even beyond these individual cases, the risks for the banks are growing.
