October 25, 2019
A recent assessment by Tilburg University, on behalf of the European Association of Co-operative Banks, finds the performance of this sector to be surprisingly strong. Some of the highlights include:
• The return on equity of co-operative banks stabilised at 6.7, despite an extremely low interest-rate environment. Since co-operative banks are noticeably primarily oriented towards retail banking, and hence dependent on interest income, it is quite an achievement that they managed to keep their average ROE at this level. Indeed, net interest income as a percentage of total assets has dropped from 1.5 in 2011 to 1.2 in 2018.
• In 2018, the number of memberships at co-operative banking groups grew by 3.3 per cent to about 84 million. This growth rate exceeded the long-term average increase of around 2 per cent per year.
• As in many preceding years, co-operative banks provided more new loans to the real economy, reported a higher deposit growth, and reduced their branch network and employment to a lesser extent than all other banks. Co-operative banks expanded their loan portfolio by 4.7 per cent; the highest increase since 2011.
Full highlights and the complete report can be found here.
This detailed assessment nicely proves our point (sections 2.1 and 2.2 of the Hidden Treasures book (2019), at 21-29) that Europe’s diverse banking system, including co-operative banks, is a hidden treasure.