BERLIN, Feb. 1 (Xinhua) -- The number of German financial institutions will fall sharply in the coming decades, a study published on Thursday by the management consultancy Oliver Wyman predicts.
Although not widely recognized by the public, the German banking system was on a long-standing "evolutionary path of consolidation", the Bank Report Germany 2030 warned.
The report's authors estimated that ultimately only between 150 and 300 institutions out of currently around 1,900 German banks would survive.
Oliver Wyman attributed this predicted outcome to a combination of factors including intensified competition from new financial technology firms (fintechs) and foreign banks, increased regulatory pressure on banks' business model, and a persistently low interest rate environment.
In light of these developments, the management consultancy concludes that too many finance-sector firms are competing against each other for a relatively-static amount of business in Germany.
The size of the country's banking industry was estimated to have remained stable at around 115 billion euros (143.5 billion U.S. dollars) between 2013 and 2016.
However, circa 1,000 credit unions, 400 savings banks and a host of larger global institutions such as Deutsche Bank, as well as more specialized businesses were already crowding out the country's resulting tripartite banking landscape.
According to the report, "a continued stability of the earnings pool also means that growth possibilities in a German bank are limited and that higher risk-related costs can devour the savings of German banks very quickly."
Furthermore, German banks lagged behind their international competitors with regards to profit margins. The sector recorded an average return on equity (after taxes) of only one percent in 2016, compared to nine percent at U.S. banks.
"The key challenge for German banks will be to find a sustainable business model for evolution, as well as disruption," the report suggested. Above all, this would imply training their organizations in "cultural flexibility" and improving their "ability to innovate".
