German Banks‘ Profit Explosion Continues?
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We have just taken a look at German bank profit data for 9M 2018 released by the ECB. We were delighted to see that
Profits almost trebled yoy to €16.3bn!
This comes on top of a yoy profit increase of 60% for FY2017.
You might know, that we are generally big fans of ECB data. We have even started to learn ECB’s data ID language to better navigate their statistical data warehouse.
Nonetheless, we struggle to make sense of German banks profit data disclosed by the ECB. The profit jump runs contrary to everything we observe in the German banking sector. Cooperative and savings banks have both just released yoy profit declines of 12% and 27% respectively for FY2018.
Dr. Wolfgang Schnorr: „Either there is an unknown profit machine in the German banking sector or ECB numbers are currently meaningless. For obvious reasons and for the time being, we go for the latter.“*
*) It might also possible that ECB has changed its data methodology, which would explain the miraculous profit increase. If we had to guess, we would put our money for instance on the inclusion of (changes in) general banking reserves according to §340g HGB in ECB profits starting in Q4 2017. We get back to you as soon as we have more details.