Editorial

Introduction by the Board of Managing Directors

Reporting a profit before taxes of €9.8 billion, the Volksbanken Raiffeisenbanken Cooperative Financial Network remains one of the most profitable banking groups in Europe. A sharp rise in the volume of customer business enabled the network to maintain net interest income at virtually the prior-year level, while net fee and commission income actually increased.

Although persistently low interest rates and the rise in costs driven by regulatory requirements will have an adverse impact on financial performance going forward, the Cooperative Financial Network can tackle the challenges and any opportunities that arise in the market from a position of competitive strength. It is also supported in this by its close ties to business and society – as reflected in its 18.3 millionstrong membership – and a sound level of equity, which has risen again to €93.0 billion.

The cooperative banks’ network of branches, which is comprehensive even by European standards, means that they are standing by their promise of remaining close to their customers. In the digital age, however, customer focus also includes digital channels, where the cooperative banking group is currently making substantial investments. Having the right mix of these distribution channels is a major factor in future success. The cornerstone of the entire customer/bank relationship remains the cooperative bank branch. Even in an omnichannel environment, the branch – with its highly qualified specialist advisors – will continue to provide the crucial edge over a business model based primarily on technology.

The interest-rate situation remains one of the biggest challenges in Europe. In view of the Brexit vote and the resulting uncertainties, there is growing concern that the European Central Bank will persist with its disastrous policy of negative interest rates. The measurable economic benefits of negative interest rates are minimal at most. However, the damage caused by the policy of extremely low interest rates is considerable, especially for personal pension products but also for the long-term development of the financial sector as a whole.

Moreover, the rising tide of regulation is not making relationships between customers and their banks any easier. Even politicians now recognize the growing burden that regulatory requirements represent, particularly for small and medium-sized banks. Nonetheless, we will continue with our joint lobbying activities in pursuit of the principle of proportionality. More subsidiarity is also required in this context. The cooperative model, with its regional roots and banks that determine their own business policies, is proof positive of the success with which individual responsibility and overarching cooperation can be combined for the benefit of business.

Uwe Fröhlich
Gerhard Hofmann
Dr. Andreas Martin

Management Report 2015 >