Germany: bankruptcies at most for 10 years. the banks are starting to get scared
German newspaper reports present such a continuous series of failures that it is difficult to follow them. First the department store chain Galeria Kaufhof Karstadt had to declare bankruptcy , then the battery company Varta was on the verge of financial collapse and needed to be rescued. Now agricultural trading company BayWa is also at risk of bankruptcy, meaning farmers fear their harvest will pay off .
The number of corporate bankruptcies in Germany is higher than in the last ten years , according to a study. This also puts a strain on German banks: the number of loans granted increases, the risk increases and the banks create more reserves. At the moment there does not appear to be any immediate improvement in sight.
German banks are setting aside more money than usual – a growing risk due to a stagnant economy
“German banks are increasingly feeling the effects of economic stagnation,” financial portal Bloomberg reported on Friday . After the German economy has barely recovered in recent years, voices of concern about an impending recession in Germany are becoming increasingly louder . The current stagnation is mainly caused by rising energy prices following Russia's invasion of Ukraine in 2022, as well as rising financing costs.
In the first half of this year, banks granted many more loans than in the previous year. The growing number of companies or consumers in difficulty leads to a greater need for loans and at the same time increases the risk for banks. According to Bloomberg, risk provisions, i.e. the reserves of the largest German banks for credit activities, increased by almost 50% in the first half of the year.
DZ Bank has quadrupled its risk reserves this year. “Despite the increase in real wages, consumption has not yet recovered and the sector also does not emerge from the weak phase,” writes DZ-Bank in a press release on economic data for the first half of the year. “However, our economists expect a slight recovery in the second half of the year, but this will not be enough for a real turnaround,” the report adds.
More failures than in 10 years: no relief in sight
A study by the German credit agency Creditreform confirms the current trend of increasing corporate insolvencies. T he number of bankruptcies in the last six months has increased by almost 30% , or 8,470 cases, compared to the same period last year. A total of 11,000 companies filed for bankruptcy in the first six months of this year. According to the study, this is the highest level in the last ten years . “In the first half of 2024, companies will continue to struggle with the effects of the 2023 recession, ongoing crises and this year's weak economic development,” says Patrik-Ludwig Hantzsch, head of economic research at Creditreform.
Personal insolvencies by individual consumers also increased by 6.7% compared to the same period last year, totaling 35,400 . The number of bankruptcies of large companies with more than 250 employees has doubled. “The effects of a company's bankruptcy are significantly greater than, for example, during the global financial crisis in 2009,” explains the Creditreform spokesperson. The financial difficulties of the tourism group FTI Group , the fashion chain Esprit and now also the department store chain Breuninger are just a few obvious examples of the current major corporate failures.
But that's not enough: in the coming months the number of corporate bankruptcies could continue to increase, as Commerzbank explains in a report on the second quarter. Commerzbank has increased its risk reserves by 52% this year.
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The article Germany: bankruptcies at most for 10 years. the banks are starting to get scared comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/germania-fallimenti-al-massimo-da-10-anni-le-banche-iniziano-ad-avere-paura/ on Tue, 03 Sep 2024 15:23:40 +0000.