ZEW-Survey among Financial Market Experts: Retail Banking on the Upswing - Investment Banking in Decline

Many German banks are forced to alter their business models as a result of the international financial market crisis. Retail banking will gain in importance while investment banking will become less important. This is the result of a survey among 274 financial market experts conducted by the Centre for European Economic Research (ZEW) in Mannheim.

Three in four experts expect adjustments in business models to be particularly necessary for cooperative central institutions and, particular, for the Federal State Banks ("Landesbanken"). However, nearly one third of the experts expect that major banks ("Großbanken") and foreign banks have to adjust their business models as a consequence of the crisis.

According to the experts, the importance of retail banking will increase following the financial market crisis. For this reason, two thirds of the survey participants assume that retail banking will be an essential business segment for German banks in the future. Almost half of the experts regard private banking with affluent clients as a very important business area. In contrast, investment banking will shrink in importance. Almost two thirds of the experts expect that investment banking will be of minor or no importance to German banks in the future. ZEW banking expert Matthias Köhler says: "For a long time, Germany’s major banks invested massively in their investment banking activities, while retail banking was considered unprofitable. Following the financial market crisis, however, they have shifted their focus on a more stable mix of revenue sources and have significantly increased their commitment in retail banking recently."

Deutsche Bank is an example for this development. By taking over Norisbank and investing in Postbank, the bank has strongly extended its retail banking activities, which had been outsourced into Deutsche Bank 24 at the beginning of the new millennium.

In contrast to the major banks, the financial market experts expect only minor adjustments of the business model of savings and cooperative banks. They traditionally focus on retail banking. Costumer confidence in such institutions has significantly grown since the crisis began.

For further information please contact

Matthias Köhler, E-Mail: koehler@zew.de