Banking industry in Germany - statistics & facts
The banking industry in Germany presents a dynamic landscape characterized by a unique three-pillar structure. This three-pillar system consists of commercial banks, the public banking sector (comprising savings banks and state banks), and cooperative banks. The decentralized network of independent regional commercial and savings banks, known as Sparkassen, plays a vital role in serving local communities, while state banks, known as Landesbanken, operate at the state level. Savings and cooperative banks cover large sections of the market, with their total assets exceeding 25 percent of the whole industry’s. In 2023, there were 683 cooperative banks and 354 savings banks active in the country, marking the highest number of banks across all categories.
While the German banking industry does not rank among the leading European banking sectors, Deutsche Bank ranks among the largest banks in Europe based on assets. In addition, the Berlin-based digital bank, N26, is one of the largest digital banks in Europe, with eight million customers at the end of 2023.
Germany's banking sector, with its unique three-pillar system, faces efficiency and profitability challenges despite its extensive reach. While traditional banks struggle with high costs and modest returns, the rise of innovative neobanks like N26 signals a transformative shift in the industry. This evolution highlights that, although the sector has hurdles to overcome, its future will likely be influenced by digital advancements and market adaptation.
While the German banking industry does not rank among the leading European banking sectors, Deutsche Bank ranks among the largest banks in Europe based on assets. In addition, the Berlin-based digital bank, N26, is one of the largest digital banks in Europe, with eight million customers at the end of 2023.
Banking system stability and efficiency
Over the past decades, the German banking sector witnessed a continuous decline in the number of banks. Notwithstanding this significant decrease, Germany maintains a more active banks than any other European country. Despite the exceptionally high number of banks, however, it only holds the second position in terms of total banking assets in Europe. In 2023, France boasted more than twice the assets held by German banks, even though Germany had approximately 1,000 more banks in operation within its borders. The substantial number of banks does not guarantee a highly stable and efficient banking system. In the last quarter of 2023, Germany reported the third-highest cost-to-income ratio in Europe – an efficiency indicator that measures operating costs as a percentage of operating income. Historically, the cost-to-income ratio of the German banking sector fluctuated between 70 and 75 percent, a relatively high range for the European average. In addition, the return on equity was 6.5 percent at the end of 2023, the second-lowest in Europe.Germany’s growing neobank success: The rise of N26
Although the German banking industry may not be ranked among the most efficient ones, it is home to one of the most prominent neobanks in Europe, namely N26. The Berlin-based online bank had roughly eight million customers in 2023, outranked only by Revolut and Wise, and it was also among the most widely downloaded European neobanks. Though N26 has yet to experience a profitable year, its total assets have increased significantly since 2016, reaching almost one billion euros in 2021.Germany's banking sector, with its unique three-pillar system, faces efficiency and profitability challenges despite its extensive reach. While traditional banks struggle with high costs and modest returns, the rise of innovative neobanks like N26 signals a transformative shift in the industry. This evolution highlights that, although the sector has hurdles to overcome, its future will likely be influenced by digital advancements and market adaptation.
