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SNL Financial: ECB stress highlights P&L crisis in Germany

According to SNL Financial, for Germany’s banks, the ECB stress test highlights poor returns and profitability, rather than their asset quality.

Broadly, the sector has suffered from a crisis of profitability rather than of asset quality. Returns between 2009 and 2013 range from the negative to the miserable according to ECB figures; SNL data shows that the poor returns have continued into 2014 for individual banks.

Only DZ Bank AG stood out from the crowd among the ECB review cohort, although there was some improvement in the first half of 2014 as DZ Bank, Aareal Bank AG and WGZ Bank all produced double-digit returns. Elsewhere, the figures were bleak.

If P&L has looked unhealthy, balance sheets have been strengthening. German banks have overall been deleveraging; their reserves and capital have been improving.

In a way, this is surprising. Germany has performed the best of all the eurozone nations during the crisis, yet bank capital has been consistently destroyed from 2009 to 2013.

Next Finance , September 2014

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