Embed Size (px)
Citation preview
©M
anagem
ent
Solu
tions
2020.
All
rights
reserv
ed.
R&D www.managementsolutions.com
Germany – 2Q20Macroeconomic Outlook Report
©M
anagem
ent
Solu
tions
2020.
All
rights
reserv
ed.
Design and Layout:
Marketing and Communication Department
Management Solutions
Photographs:
Management Solutions’ picture library,
Fotolia, Shutterstock
Management Solutions 2020
All rights reserved. This publication may not be reproduced, distributed, publicly released or transformed, wholly or in part, freely or onerously, using any means or methods, without the prior written consent of Management Solutions. The contents of this publication are provided for information purposes only. Management Solutions does not accept any liability for the use that might be made of this information by third parties. The use of this material by anyone without the express authorization of Management Solutions is forbidden.
Economic and Financial Report 2Q20
3
3. German macroeconomic overview 12
Index
164. Banking sector: general overview
246. Appendix
1. Executive summary 4
2. International overview 8
225. Telecommunications sector
4
0.11 0.75 0.39
-2.23
-11.26
-6.60
5.77
2Q19 3Q19 4Q19 1Q20 2Q20 2020 2021
As a result of the lockdown of the world’s economy, and in particular the Germaneconomy, during 2Q20, Germany´s GDP registered an unprecedented contraction inits y/y growth rate down to -11.26%. Due to the containment measures taken by theGerman government to mitigate the spread of the coronavirus, both domestic andexternal demand sharply fell this second quarter of the year, distressing as a resultGerman GDP y/y growth. CPI y/y growth decreased when compared to 2Q20,amounting to 1.34% in 2Q20. Furthermore, the German labor market was deeplyaffected by the economic effects of the lockdown, resulting in an increase in theunemployment rate and a contraction in employment growth.
In 2Q20, Germany´s economy registered a GDP rateof -11.26%, after plunging 9.03 p.p. when comparedto the previous quarter .
This was mainly due to the unseen decrease in boththe external and internal demand of the Germaneconomy, heavily affected by the containmentmeasures carried out during most of the secondquarter of 2020 by the German and worldgovernments to contain the spread of the virus.
Private consumption and exports were speciallyaffected during this quarter as a result of thelockdown, decreasing 10.64 p.p. and 18.33 p.p.respectively compared to the previous quarter(which had already suffered the effects of thecoronavirus crisis).
Furthermore, in a single-hit scenario, in which asecond outbreak is avoided, the OECD expects theGerman economy to shrink 6.60% in 2020,recovering at a 5.77% rate in 2021. Additionally in amore severe double-hit scenario, the OECD expectsthe German economy to contract 8.76% in 2020,barely recovering at a y/y growth rate of 1.67% in2021.
During 2Q20, Germany´s unemployment rate increased by 0.57p.p to 4.17% compared to the previousquarter. Furthermore, the y/y growth rate of employment during 2Q20 recorded a 1.55 p.p. decrease withrespect to the first quarter of the year, registering a growth rate of -1.25%. The labor market is expected tobe one of the hardest hit sectors worldwide.
Regarding inflation, the CPI index recorded a 1.34% year-over-year growth rate in the second quarter of2020, which was 0.30 p.p. lower than the one registered in the previous quarter, following the global andEuropean tendency.
During the second quarter of 2020, the average $/€ exchange rate remained constant with respect to 1Q20,at 1.10 $/€.
Like most stock markets around the world, due to uncertainty surrounding the pandemic and the economicconsequences of the lockdown and despite the reactivation of the economy at the end of the secondquarter, the German Stock Index (DAX 30) quarterly average experienced a slight decrease during 2Q20.The quarterly average stood at 11,586, after decreasing 0.14% when compared to the previous quarter(which had already registered a sharp drop of 11.55%).
1. Executive summaryMacroeconomic overview
Source: Deutsche Bundesbank. Projections: OECD single-hit scenario
GDP (%)
Year-over-year Projection
Macroeconomic overview
Economic and Financial Report 2Q20
5
During the second quarter of 2020 total loans decreased by 0.39 p.p. to a y/y rate of4.11% compared to 1Q20. The y/y growth rate of total deposits increased by 0.21 p.p.with respect to the previous quarter, registering a growth of 5.98%. The NPL ratio*stood at 1.15%, which represented a decrease of 0.15 p.p. compared to 1Q19. As forthe coverage ratio*, it decreased by 1.93 p.p. in the first quarter of 2020 compared to1Q19, amounting to 39.17%. In terms of efficiency, the German financial systemincreased its cost to income ratio by 5.61 p.p. compared to 1Q19 and is now up to91.61%.
On the other hand, the y/y growth rate of totaldeposits accelerated by 0.21 p.p. in 2Q20 whencompared to the previous quarter, to a rate of5.98%. Commercial banks and other increasedtheir growth rates whereas saving institutions andLandesbanken decreased them when comparedto the previous quarter.
During 1Q20, Germany´s financial systemrecorded a 0.42 p.p. y/y decrease in its LTD ratio,which stood at 110.33%.
On the other hand, during 1Q20, the NPL ratio*stood at 1.15%, which represented a decrease of0.15 p.p. when compared to the 1Q19.
In the first quarter of 2020* the coverage ratio ofthe German financial system decreased by 1.93when compared to 1Q19, amounting to 39.17%.
In terms of efficiency, the ratio of the Germanfinancial system increased by 5.61 p.p. comparedto 1Q19, totaling 91.61% during the first quarterof 2020*.
Banking sector
LOANS (Year-over-year) (%)
Source: Deutsche Bundesbank.
Source: Deutsche Bundesbank.
DEPOSITS (Year-over-year) (%)
Banking sector
During the second quarter of the year, loans to allsectors registered a deceleration in their y/y ratewith respect to 1Q20. Total loans decreased by0.39 p.p. in 2Q20 when compared to 1Q20, to ay/y rate of 4.11%.
*Most updated data available at the time of the reléase of the report corresponds to 1Q20
4.62 4.85
3.86
4.504.11
2Q19 3Q19 4Q19 1Q20 2Q20
4.70
3.99 4.16
5.77 5.98
2Q19 3Q19 4Q19 1Q20 2Q20
6
57.39
26.57
21.72
5.77
3.33
Conventional telecommunications
networks*
Mobile services
-1.37%
0.70%
11.37%
0.56%
0.08%
Δ 2019/2018
HFC networks
Other revenue
TOTAL
In 2019*, the external revenue of the telecommunications sector increased by 0.70%when compared to 2018, due to the increases in the external revenue in conventionaltelecommunications networks (+0.56%), external revenue from mobile services(+0.08%) and other external revenue sources (+11.37%). External revenue from HFCnetworks decreased 1.37%. The number of fixed connections decreased by 0.52%along with mobile connections which experienced a 0.28% decrease. Fixed trafficshrunk by 11.32%, while on the other hand, mobile traffic experienced a growth of6.72%.
During 2019, external revenue in thetelecommunications sector amounted to € 57.39billion, after a y/y increase of 400 million (0.70%).
External revenue from mobile services increased to€ 26.57 billion in 2019 (+0.08%). In the conventionaltelecommunications networks segment, revenuesincreased 0.56% to € 21.72 billion in 2019. Otherrevenues grew by 11.37%, to € 3.33 billion in 2019.
On the other hand, HFC networks revenuesdecreased y/y by 1.37% to € 5.77 billion.
In terms of volume, fixed connections decreased by0.20 million (-0.52%) during 2019 with respect to2017, to 38.20 million connections. In terms ofmobile connections, a slight decrease of 0.30 millionconnections was registered, 0.28% less than thenumber of connections reported in 2018.
EXTERNAL REVENUE OF THE SECTOR (€ Billion)
Source: Bundesnetzagentur.
*includes networks based on copper and optical fiber cables.
Telecommunications sector
Other sectors: telecommunications
* Annual frequency data.
Economic and Financial Report 2Q20
7
8
2. International OverviewOECD & China
During the second quarter of 2020, the vast majority of developed economies registeredsignificant contractions in their economic growth. Containment measures led to blockagesof industrial and commercial activity as well as limitations on consumption and tourism.China was the only economy analyzed to register a positive GDP y/y growth rate.
The COVID-19 pandemic and the measures taken to contain it have led to an unprecedented global economiccollapse. Global demand, industrial production, international trade, tourism and capital flows all plummeted,weighing down the world economy.
In the Eurozone, one of the most affected regions by the virus during 2Q20 and where the most severe lockdownswere carried out (paralyzing even non-essential activities), the y/y growth rate plummeted by 14.74%. Countrieslike France, UK and Spain stood out as their economies fell by 18.91%, 21.72% and 21.51% respectively comparedto the same period of the previous year. Likewise, countries such as Germany and Italy registered significantdecreases of 11.26% and 17.74%. Moreover, international agencies are predicting major collapses for 2020.According to the OECD, the euro area will register a fall of 9.10%, likewise according to the IMF, the fall would standat 10.20%. The recovery in 2021 would be 6.5% according to the OECD and 6% according to the IMF.
Moreover, during 2Q20 the growth rate of the United States' GDP fell by 31.70%. The US has been severely hit bythe spread of the virus, collapsing the country's health system and economy. According to the OECD, the US isexpected to contract by 7.30% in 2020, recovering 4.10% in 2021. On the other hand, Japan registered a 8.13 p.p.fall down to a growth rate of -10.06%. The forecast for the Japanese economy was adjusted downwards, placingthe country at a negative 6.00% growth rate in 2020, and a 2.10% recovery in 2021 according to the OECD.
China was the most affected country during the first quarter of 2020 given that it was the first country to implementvirus containment measures and therefore to paralyze a large part of its economy. As a result, it recorded a morepronounced fall than the rest of the economies during 1Q20 (-6.80%). This said, it has begun its recovery earlier andin 2Q20 it recorded a y/y growth rate of 3.20%.
Global political uncertainty was increased as a result of global tensions that arose or were amplified due to thespread of the virus. Negotiations between the EU and the UK on Brexit remain open and both sides are preparingthemselves for the possibility of an eventual exit without an agreement. On the other hand, the increase of tensionsbetween China and the US and the deteriorated relations of the OPEC+ member countries add uncertainty to thecurrent context. Moreover, social discontent is increasingly tangible and widespread in countries like the US andSpain due to racial tensions and economic and social policies in response to the pandemic.
Inflation in advanced economies decreased in all the analyzed countries during the second quarter of the year, withSpain and Italy even recording negative figures (-0.63% and -0.13% respectively). Up until now, the ECB has notcarried out any measures in this respect, but it has recognized that there is downward pressure on inflation.
The labor market was heavily hit by the pandemic. Unemployment increased during 2Q20 in all the countriesconsidered with the exception of France and Italy. The increase in the unemployment rate in the US wasnoteworthy (9.20 p.p. more than in 1Q20, up to 13.00%), and the unemployment rate in Spain stood much higherthan the rest of the countries analyzed, reaching a rate of 15.33%.
During 2Q20, the ratings remained constant for all countries except for Fitch's downgrade of Italy from BBB to BBB-in April.
To mitigate the economic effects of the pandemic, both the Fed and the ECB continue to deploy their monetarytools. In the case of the Fed, interest rates have been maintained at 0% since March and the ECB continues to holdinterest rates at 0%, deposit facilities at -0.5% and to implement the PEPP (Pandemic Extraordinary purchaseprogram). In addition, the Central Bank of China cut interest rates in February and April down to 3.85%.
Year-on-year credit growth accelerated in China, France, Italy, Japan and Spain while it slowed down in the rest ofthe countries. The decrease in the UK and Canada's credit growth rate (6.35 and 3.56 p.p. down to 5.49% and 4.73%respectively) and the Japans´ increase (+4.62 percentage points to 7.04%) were noteworthy.
Deposits accelerated in all countries except for the UK, which experienced a drop of 3.37 p.p. compared to 1Q20,down to 7.57%. The largest increases occurred in Canada and the USA: 6.25 and 7.51 percentage points, reaching16.30% and 20.80% respectively.
Macroeconomic Overview
Financial Sector
Economic and Financial Report 2Q20
9
< 0%
0 - 2%
2 - 5%
> 5%
-
-
UNEMPLOYMENT RATE 2Q20 (%)
Loans
Deposits
LOANS AND DEPOSITS 2Q20 (year-over-year growth rate)
Increase since 1Q20
Constant since 1Q20
Decrease since 1Q20
GDP 2Q20 (% year-over-year growth rate)
-31.70%USA
-10.20%Japan
3.20%China
-21.72%UK
-14.74%EMU
-18.91%France
-11.26%Germany
-17.74%Italy
-13.01%Canada
-21.51%Spain
INFLATION RATE 2Q20 (%)
MOODY'S S&P Fitch
Germany Aaa AAA AAA
Canada Aaa AAA AAA
China A1 A+ A+
Spain Baa1 A A-
France Aa2 AA AA
Italy Baa3 BBB BBB-
Japan A1 A+ A
UK Aa2 AA AA-
USA Aaa AA+ AAA
LONG TERM RATINGS 2Q20
*OECD aggregated data from 2Q20 *OECD aggregated data from 2Q20
4.17
13.0015.33
7.00 8.29
2.83 3.97
13.00
7.74 8.35
3.84
GER CAN SPA FR ITA JAP UK USA EMU OECD* CHI
1.34
0.02
-0.63
0.30
-0.13
0.100.63 0.44 0.30
0.87
2.73
GER CAN SPA FR ITA JAP UK USA EMU OECD* CHI
4.11 4.73
13.01
2.16
7.34
0.34
7.04
3.995.49 5.67
5.545.98
16.30
10.48
6.53
13.62
6.51
8.91 7.36 7.57
20.80
10.74
Germany Canada China Spain France Italy Japan EMU UK USA Average
10
2. International OverviewLatAm
During 2Q20, the y/y GDP growth rate plummeted in the countries analyzed. This was aresult of the preventive measures adopted to tackle the spread of the virus, which lastedthroughout the entire quarter in countries such as Argentina, Chile, Colombia and Peru.Likewise, unemployment increased significantly while the average inflation fell.
During the second quarter of 2020, activity in Latin America as a whole plummeted as a result of the COVID-19crisis. All the countries analyzed recorded significant contractions in their year-on-year GDP growth rates comparedto the previous quarter. The most notable declines were experienced in Colombia (-15.45%, -16.43 p.p. comparedto 1Q20), Mexico (-18.68%, -16.51 p.p. with respect to 1Q20) and Peru (-30.24%, -26.85 p.p. compared to 1Q20),with the latter being the most affected country in terms of GDP. Colombia and Chile, which were the only countriesto grow during 1Q20, have seen their growth rates plummet during this second quarter of 2020. In the case ofChile, the drop during the second quarter of the year was -14.08 p.p., reaching -13.68%.
According to the International Monetary Fund economic outlook, Latin America will be one of the world regionsmost economically affected by the pandemic, where GDP is expected to contract by 9.40% in 2020, recovering at arate of 3.70% in 2021, one of the weakest recoveries among the emerging regions (only ahead of the MiddleEast/Central Asia and Sub-Saharan Africa). All IMF projections had to be revised in June 2020 as the impact of theCOVID-19 was greater than initially expected.
In the case of Latin America, according to the Bank of Spain, the pandemic affects the economy through multiplechannels. On the one hand, there is a sharp decrease in exports due to the paralysis of the world economy andespecially of trading partners such as the United States (with an impact especially on Mexico) and China (affectingmainly Chile and Peru). On the other hand, the drop in prices of raw materials and especially oil has significanteffects particularly in Colombia and Mexico. Thirdly, the paralysis of world tourism has also affected Latin Americaas it´s a sector which has a greater weight on the economy than in other emerging regions. In addition, financialmarkets have also been destabilized as a result of global uncertainty causing increases in sovereign spreads anddepreciation of exchange rates. Finally, domestic demand is being deeply affected by both the decline inconsumption (as a result of reduced income and containment measures) and the reduction in business investment.According to the Bank of Spain, the elevated rates of informality in the labor market of around 50% in the regionand the lower institutional quality of some countries make it challenging for government policies to be effective.
During 2Q20, inflation decreased in all Latin American countries analyzed, and with the exception of Argentina, allvalues recorded were below 3.00%, with a particularly notable fall in the case of Brazil (-1.69 p.p. down to 2.14%).On the other hand, Argentina also recorded a significant drop, from 49.00% in 1Q20 to 42.53% in 2Q20 (-6.47 p.p.).Despite this significant drop, inflation in Argentina continues to be well above the rest of the economies in theregion.
Unemployment increased significantly throughout the region, with Colombia recording the largest increase (9.37p.p. to 20.62%), and standing as the country with the highest unemployment rate in the region.
As for the rating, Mexico registered a drop in all its ratings in April. Argentina went from an S&P rating of CCC- to SDin April and according to Fitch it dropped to RD (both ratings consider that there has been a punctual default ofobligations). Likewise, Colombia registered a downgrade in its Fitch rating. The rest of the Latin American countriesanalyzed maintained their ratings constant.
In most countries, central banks have decided to lower official interest rates to mitigate the economic effects of theCOVID-19. In addition, other measures adopted by central banks include the purchase of assets, credit support,provision of liquidity and various measures to stabilize exchange rates.
The average lending rate in the countries analyzed accelerated by 0.27 p.p. compared to 1Q20. However, Chile,Mexico, and Colombia recorded slowdowns, being especially significant in the case of Mexico (-4.31 p.p.)
Deposit concession rates grew on average in Latin America, increasing in all countries compared to 1Q20 with theexception of Chile (-3.46 p.p.) and Mexico (-0.40 p.p.). It is worth noting the increase in Peru's and Brazil’s rate of13.70 and 15.49 percentage points up to 24.78% and 33.58% respectively.
Macroeconomic Overview
Financial Sector
Economic and Financial Report 2Q20
11
GDP 2Q20 (% Year-over-year growth rate)
< 0%
0 - 2%
2 - 5%
> 5%
LOANS AND DEPOSITS 2Q20 (Year-over-year growth rate)
LatAm*
-15.81%
Argentina
-19.09%
Mexico-18.68%
Colombia
-15.45%
Peru
-30.24%
Brazil
-11.39%
Chile -13.68%
Loans
Deposits
Increase since 1Q20
Constant since 1Q20
Decrease since 1Q20
LONG TERM RATINGS 2Q20
INFLATION RATE 2Q20 (%)UNEMPLOYMENT RATE 2Q20 (%)
MOODY'S S&P FITCH
Argentina Ca SD RD
Brazil Ba2 BB- BB-
Chile A1 A+ A
Colombia Baa2 BBB- BBB-
Mexico Baa1 BBB BBB-
Peru A3 BBB+ BBB+
*Latin America figures calculated as an average including Argentina, Brazil, Chile, Colombia, Mexico and Peru.** Most updated figures available at the date of the release correspond to 1Q20. *** Most updated figures available at the date of the release correspond to 4Q19.
13.10 12.93 10.82
20.62
3.54
12.80 12.30
ARG BRA CHI COL MEX** PER LatAm*
42.53
2.14 2.93 2.85 2.77 1.709.15
ARG BRA CHI COL MEX PER LatAm*
20.70
13.35
5.91
9.90 10.01
17.11
12.83
26.49
17.04
11.95
33.58
18.49
24.7822.05
Argentina*** Chile Mexico Brazil Colombia Peru LatAm*
12
1.780.54 0.31
-1.32
-8.55
2Q19 3Q19 4Q19 1Q20 2Q20
0.110.75 0.39
-2.23
-11.26
2Q19 3Q19 4Q19 1Q20 2Q20
1.45
2.992.61
2.111.24
2015 2016 2017 2018 2019
Year-over-year
3. German macroeconomic overview
During the second quarter of the year, the German economy suffered a record breakingcontraction. This downfall was due to the prolonged containment measures carried outduring most of the quarter both nationally and globally. These measures resulted insevere falls in private consumption and exports during April and May. Germany´s GDPregistered a decrease of 9.03 p.p. in its y/y growth rate, which stood at -11.26%.
In 2Q20, Germany´s economy registered a GDPy/y growth rate of -11.26%, after decreasing 9.03p.p. when compared to the rate reported in 1Q20.
This behavior was due to continued containmentmeasures around the world, specially during thefirst two months of the quarter, resulting in sharpdeclines in the macroeconomic indicators. Therewas a slight recovery during the end of May andJune, but in spite of this, the economy recordedunprecedented figures and will likely not fullyrecover to pre-covid levels during 2021.
According to the Bundesbank, industrial outputand exports of goods underwent only a mutedrecovery in May. Even though industry hadbottomed out, it recouped just one-quarter of itsprevious losses from March and April.
The OECD forecasted two different scenarios; asingle-hit scenario, where a second outbreak isavoided, and a double hit scenario where thesecond outbreak occurs in all economies towardsthe end of the year. In the single hit scenario, theOECD expects the German GDP to record a y/ygrowth rate of -6.60% in 2020, heavily impactedby the current pandemic situation, and a 5.77%recovery in 2021. In the more severe double-hitscenario, the OECD expects the German GDP tocontract by 8.76% in 2020, barely recovering at ay/y growth rate of 1.67% in 2021.
Regarding the external sector, imports of goodsand services decreased by 15.40 p.p. in thesecond quarter of 2020 with respect to 1Q20,down to a y/y growth rate of -17.41%.Furthermore, exports decreased by 18.33 p.p.down to a rate of -22.18% during the secondquarter of 2020.
ProjectionAnnual growth
REAL GDP GROWTH (%)
DOMESTIC DEMAND (%)
Annual growth Year-over-year
Source: Deutsche Bundesbank.
Fiscal policy in Germany will continue to be considerably loosened as a result of the Covid-19 crisis. It will have anexpansionary effect mainly via the expenditure side.
Domestic demand was hard hit by the consequences of the containment measures carried out in Germany duringthe majority of the second quarter of the year, registering a decrease of 7.23 p.p. when compared to the previousquarter, down to a rate of -8.55%. Private consumption suffered the sharpest fall of its components, gross fixedcapital formation decreased by 7.48 p.p. down to an -8.61% y/y growth rate. On the other hand, publicconsumption increased by 1.20 p.p., registering a y/y growth rate of 3.84%.
Source: Deutsche Bundesbank. Projections: OECD single-hit scenario
2.911.30 0.59
-6.60
5.77
2017 2018 2019 2020 2021
Economic and Financial Report 2Q20
13
1.70 1.471.24
1.641.34
2Q19 3Q19 4Q19 1Q20 2Q20
1.511.73
1.45
0.85 0.70
2017 2018 2019 2020 2021
1.57 1.90 1.20
-2.26
-12.90
2Q19 3Q19 4Q19 1Q20 2Q20
During the second quarter of 2020, the y/y growth rate of private consumption recordeda sharp fall when compared to 1Q20, down to -12.90%, due to the confinementmeasures and its consequences. CPI y/y growth also decreased when compared to 1Q20,down to 1.34% in 2Q20.
During the second quarter of the year, privateconsumption recorded a pronounced 10.64 p.p.decrease compared to the previous quarter,down to -12.90%, ongoing with the downwardtrend started at the end of 2019. Thisperformance was due to the containmentmeasures carried out by the German governmentduring the first months of the second quarter ofthe year.
The OECD expects private consumption growthto decrease in the single-hit scenario down to-5.99% in 2020 and accelerate in 2021 to a rate of7.60%, making it one of the main drivers of theeconomic recovery in 2021. On the other hand, inthe double-hit scenario, private consumptionwould contract 8.06% in 2020, and grow at a4.10% rate in 2021.
Regarding inflation, the CPI index recorded a1.34% year-over-year growth rate in the secondquarter of 2020, which was 0.30 p.p. lower thanthe one registered in the previous quarter.
The OECD forecasted a CPI growth rate of 0.85%in 2020 and 0.70% in 2021 in the single-hitscenario. In the alternate double-hit scenario, theOECD expects CPI growth rates of 0.84% in 2020and 0.38% in 2021.
According to the Bundesbank, this was primarilythe result of energy prices, which continued todecrease sharply as a result of the severe fall indemand for oil during the start of the secondquarter.
CPI (%)
Source: Deutsche Bundesbank. Projections from OECD single-hit scenario.
Year-over-yearAnnual growth Projection
Year-over-year
PRIVATE CONSUMPTION (%)
Annual growth
Source: Deutsche Bundesbank. Projections from OECD single-hit scenario.
Projection
1.81 1.51 1.61
-5.99
7.60
2017 2018 2019 2020 2021
14
1.09 0.84 0.640.30
-1.25
2Q19 3Q19 4Q19 1Q20 2Q20
3.07 3.03 3.20 3.604.17
2Q19 3Q19 4Q19 1Q20 2Q20
During 2Q20, Germany´s unemployment rateaccelerated when compared to the previousquarter, up to 4.17% after an increase of 0.57 p.p.
The OECD projected unemployment rate tocontinue increasing during the current year, as aresult from the economic effects of the COVID-19pandemic. In the single-hit scenario,unemployment rate is expected to record a 4.51%in 2020 and 4.25% in 2021. In the double-hitscenario, unemployment would reach 4.62% in2020 and 5.26% in 2021.
The measures carried out by the Germangovernment to contain the health impact of thepandemic has taken a heavy toll on the labormarket according to the Bundesbank report.
The Federal Employment Agency registered 2.94million unemployed people at the end of thesecond quarter.
Annual average Projection
UNEMPLOYMENT RATE (% of all economically active)
Quarterly average
Source: Deutsche Bundesbank. Projections from OECD single-hit scenario
Regarding the German labor market, during 2Q20 the unemployment rate recorded anincrease with respect to the previous quarter, registering a rate of 4.17%. On the otherhand, the y/y growth rate of employment decreased reaching a negative rate of -1.25%for the first time since 2010.
The y/y growth rate of employment during 2Q20recorded a fall of 1.55 p.p. with respect to the firstquarter of the year, registering a growth rate of-1.25%.
According to the Bundesbank report,employment sharply fell in May, considering thatall the sectors were affected, with the exceptionof public administration, banking, insuranceservices, and agriculture.
EMPLOYMENT (%)
Year-over-year
Source: Deutsche Bundesbank.
Annual growth
3.76 3.40 3.13
4.51 4.25
2017 2018 2019 2020 2021
1.09 1.32 1.44 1.320.93
2015 2016 2017 2018 2019
Economic and Financial Report 2Q20
15
1.13 1.11 1.11 1.10 1.10
2Q19 3Q19 4Q19 1Q20 2Q20
11,007 10,289
12,436 12,160 12,216
2015 2016 2017 2018 2019
1.11 1.11 1.131.18
1.12
2015 2016 2017 2018 2019
During the second quarter of the year and incontrast to 2Q19, German bonds decreased for alltypes of maturities except for the 1 year maturitybond (+0.03 p.p.). The decrease in the 10 yearbond was the largest, decreasing 0.28 p.p. whencompared to the same quarter of the previousyear.
On the other hand, when compared to the secondquarter of 2018, German bonds registereddecreases for long term maturities, whileregistering increases for 3M, 6M and 1Y bonds.When compared to 2Q18, the largest decreasewas again registered in the 10Y bond, recording adecrease of 0.85 p.p.. On the contrary, the largestincrease was registered in the 1Y bond whencompared to 2Q18.
EXCHANGE RATE ($/ € daily average)
Source: Data from European Central Bank,
Source: Deutsche Bundesbank.
Note: Annual and quarterly rates refer to the annual and quarterly averages of
the daily closing values.
DAX 30 (points)
Annual average Quarterly average
Annual average Quarterly average
During the second quarter of 2020, German bond yields registered decreases in all theirinterest rate maturities compared to 2Q19 except for the 1 year bond yield. However,when compared to 2Q18, 3 month, 6 month and 1 year maturities recorded increases.The euro dollar exchange rate remained constant when compared to 1Q20. The GermanStock Index stood, on average, at 11,586 points during the 2Q20, after falling by 0.14%compared to 1Q20.
During the second quarter of 2020, the eurodollar exchange rate remained constant whencompared to 1Q20, recording an averagequarterly exchange rate of 1.10 $/€.
The quarterly average exchange rate decreasedby 0.03 $/€ when compared to the same quarterof the previous year.
As a result of the pandemic and the uncertainty itcaused, the German stock market plummetedduring the first quarter, and slightly decreasedduring the second.
In further detail, the German Stock Index (DAX 30)quarterly average experienced a slight decrease,down to 11,586 points during the second quarterof 2020. The German Stock Index decreased 17points when compared to the previous quarter.
Moreover, the main stock index decreased by 571points in 2Q20 when compared to the samequarter of the previous year (4.92%).
TREASURY YIELD CURVES RATES (%)
Source: Deutsche Bundesbank. 2Q18 2Q19 2Q20
12,157 12,18513,117
11,60311,586
2Q19 3Q19 4Q19 1Q20 2Q20
-1.00
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
3M 6M 1Y 5Y 10Y
16
4.26 4.59 4.23 4.86 5.14
2Q19 3Q19 4Q19 1Q20 2Q20
6.68 6.82
3.90 4.50 4.80
2Q19 3Q19 4Q19 1Q20 2Q20
10.469.22
3.26 3.19 2.25
2Q19 3Q19 4Q19 1Q20 2Q20
4. Banking sector: general overviewLoans
LOANS (Year-over-year) (%)
Source: Deutsche Bundesbank.
*Note: Others includes Regional institutions of credit cooperatives, credit cooperatives, mortgage banks, building and loan associations and special purpose banks.
Commercial Banks Landesbanken
Saving Banks
Total Loans
Others*
During the second quarter of 2020, the y/y growth rate of total loans decelerated by0.39 p.p. compared to the previous quarter, down to 4.11%. This behavior was drivenby the performance of Commercial Banks and Landesbanken which registereddecelerations during the second quarter of the current year.
During the second quarter of 2020, the y/y growth rate of total loans in the German financial systemdecelerated by 0.39 p.p. to 4.11%.
The decrease in the y/y growth rate of total loans during 2Q20 was due to the decreases registered in they/y growth rates of Commercial Banks and Landesbanken.
During 2Q20, the year-over-year growth rate of loans granted by Landesbanken registered a considerabledeceleration compared to 1Q20 of 2.69 p.p. down to 4.95%.
Commercial Banks also decreased their loans y/y growth rate by 0.94 p.p. to 2.25% in 2Q20.
On the other hand, saving banks experienced an increase of 0.30 p.p. in their loans y/y growth rate, whichstood at 4.80% at the end of the second quarter of 2020.
Other Institutions experienced an increase of 0.28 p.p. in their growth rate of loans when compared to theprevious quarter, to a 5.14% rate.
4.62 4.85 3.86 4.50 4.11
2Q19 3Q19 4Q19 1Q20 2Q20
-14.41
-10.31
4.35
7.644.95
2Q19 3Q19 4Q19 1Q20 2Q20
Economic and Financial Report 2Q20
17
Total loans decelerated by 0.39 p.p. in 2Q20 whencompared to 1Q20, to a y/y rate of 4.11%.
As in the previous quarter, a large proportion ofthe loans to the private sector were granted tohouseholds, in particular in the form ofmortgages. Loans to households decelerated by0.44 p.p. to a y/y rate of 4.19%.
Y/y growth rate of loans to non-financialcorporations also decelerated their y/y growthrate by 0.74 p.p., down to 6.08% in 2Q20.
Loans to other segments decreased with respectto 1Q20 by 0.09 p.p. registering a positive y/y rateof 2.57% in 2Q20.
During the second quarter of 2020, all types of loans registered decelerations in theiry/y growth rates when compared to the previous quarter and therefore drove thedecrease of total loans in the German financial system. Regarding distribution,households loans accounted for 40.14% of total loans, while those granted to non-financial corporations and other segments registered shares of 25.93% and 33.93%,respectively in 2Q20.
Household loans made up 40.14% of total loans in 2Q20, 0.06 p.p. less than in the previous quarter,while loans to non-financial corporations accounted for 25.93% (a quarterly increase of 0.16 p.p.) of totalcredits to the private sector.
Loans to other segments amounted to 33.93% of the total loan volume during 2Q20, decreasing itsshare with respect to 1Q20 by 0.11 p.p..
HouseholdsNon-Financial Corporations
Others*Total Loans
LOANS (Year-over-year) (%)
Source: Deutsche Bundesbank.
*Note: Others includes loans to Government, Securities, Money Market and Bills.
Loans distribution in private sector 2Q20 (%)
Source: Deutsche Bundesbank.
40.14%
25.93%
33.93%Household
Corporations
Other
4.15 4.21 4.45 4.63 4.19
2Q19 3Q19 4Q19 1Q20 2Q20
4.624.85
3.864.50 4.11
2Q19 3Q19 4Q19 1Q20 2Q20
7.987.16
6.36 6.826.08
2Q19 3Q19 4Q19 1Q20 2Q20
2.803.93
1.35
2.66 2.57
2Q19 3Q19 4Q19 1Q20 2Q20
18
4.70 3.99 4.16 5.77 5.98
2Q19 3Q19 4Q19 1Q20 2Q20
During 2Q20, the y/y growth rate of total deposits experienced an acceleration of 0.21p.p. with respect to the previous quarter, registering a growth rate of 5.98%. Commercialbanks and other institutions registered increases up to -4.73% and 11.07% respectively.
The y/y growth rate of total deposits accelerated by 0.21 p.p. in 2Q20 when compared to the previousquarter, to a rate of 5.98%.
Commercial banks and other Institutions were the only ones to register increases, increasing by 0.35 p.p. and0.34 p.p. respectively when compared to 1Q20.
Landesbanken recorded the second positive deposit growth rate since 3Q17 despite registering a 0.23 p.p.deceleration in their y/y growth rate when compared to 1Q20.
Saving Institutions registered a notable 17.11 p.p. deceleration with respect to 1Q20, down to a y/y growthrate of deposits of -8.66%.
Deposits: by entity
Commercial Banks Landesbanken
Saving Banks
Total Deposits
Source: Deutsche Bundesbank.
*Note: Others includes Regional institutions of credit cooperatives, credit cooperatives, mortgage banks, building and loan associations and special purpose banks.
DEPOSITS BY TYPE OF ENTITY (Year-over-year, %)
Others*
6.06
-1.17-4.15
-5.08-4.73
2Q19 3Q19 4Q19 1Q20 2Q20
-16.45
-8.44 -10.65
1.13 0.90
2Q19 3Q19 4Q19 1Q20 2Q20
11.126.15
3.878.45
-8.66
2Q19 3Q19 4Q19 1Q20 2Q20
6.267.30
5.6310.73 11.07
2Q19 3Q19 4Q19 1Q20 2Q20
Economic and Financial Report 2Q20
19
3.70
-2.05-5.28
-10.08 -8.10
2Q19 3Q19 4Q19 1Q20 2Q20
7.77 9.09 10.56 13.49 14.52
2Q19 3Q19 4Q19 1Q20 2Q20
4.14
-16.26
79.24
146.29
42.15
2Q19 3Q19 4Q19 1Q20 2Q20
Source: Deutsche Bundesbank.
*Note: Others includes Regional institutions of credit cooperatives, credit cooperatives, mortgage banks, building and loan associations and special purpose banks.
Commercial Banks Landesbanken
Saving Banks
Total Sight Deposits
Others*
Commercial Banks Landesbanken
Saving Banks
Total Time Deposits
Others*
During the second quarter of 2020, the growth rate of total sight deposits experienced an acceleration of0.09 p.p. with respect to the previous quarter, to a rate of 10.75%. This behavior was mainly due to theacceleration of sight deposits in Landesbanken and other institutions. Saving banks registered the biggestdecrease, decreasing by 104.14 p.p. when compared to the previous quarter.
As for time deposits, they registered a 0.80 p.p. decrease in their y/y growth rate, recording a negative rateof -6.07%. This behavior was explained by the deceleration in the growth rate of all type of entities exceptfor commercial banks, which recorded an acceleration of 1.98 p.p. up to a still negative rate of -8.10% in itsy/y growth rate compared to the previous quarter.
DEPOSITS BY MATURITY (Year-over-year, %)
Deposits: by maturity
6.50 7.09 7.23 10.66 10.75
2Q19 3Q19 4Q19 1Q20 2Q20
8.63
-0.20 -2.62
0.37
-1.25
2Q19 3Q19 4Q19 1Q20 2Q20
-8.11
0.65
-46.70
-9.52 -3.50
2Q19 3Q19 4Q19 1Q20 2Q20
-1.23 -2.89 -2.90 -5.27 -6.07
2Q19 3Q19 4Q19 1Q20 2Q20
-20.06
-12.44
7.58 6.52 3.08
2Q19 3Q19 4Q19 1Q20 2Q20
12.2410.00
-6.44
-13.94 -16.20
2Q19 3Q19 4Q19 1Q20 2Q20
-0.52 -1.04 -2.87 -2.33-5.63
2Q19 3Q19 4Q19 1Q20 2Q20
20
137.09 139.39 139.32 137.62 138.21
2Q19 3Q19 4Q19 1Q20 2Q20
165.33 166.95 169.43155.84 157.81
2Q19 3Q19 4Q19 1Q20 2Q20
110.53111.69 110.95 110.75 110.33
2Q19 3Q19 4Q19 1Q20 2Q20
TOTAL LOANS / TOTAL DEPOSITS (Quarterly, %)
Commercial Banks Landesbanken
Saving Banks
Total System
Others*
Source: Deutsche Bundesbank.
*Note: Others includes Regional institutions of credit cooperatives, credit cooperatives, mortgage banks, building and loan associations and special purpose banks.
During the second quarter of 2020, total loans-to-deposits ratio of the German financialsystem experienced a decrease of 0.42 p.p. with respect to the previous quarter of 2020,down to 110.33% in 2Q20.
Germany´s financial system recorded a 0.42 p.p. y/y decrease in its LTD ratio, which stood at 110.33% inthe second quarter of 2020. This was due to the decrease in the ratios of commercial banks and savinginstitutions.
By entities, commercial banks (-0.07 p.p.) and saving banks (-1.91 p.p.) decreased their LTD ratio withrespect to 1Q20.
Once again, Landesbanken recorded the largest ratio amounting to 157.81%. Commercial bankscontinued to be the only type of entity recording a higher volume of deposits than loans, with a LTD ratioof 87.92%.
Loans / Deposits
87.98 88.29 86.85 87.99 87.92
2Q19 3Q19 4Q19 1Q20 2Q20
104.08 104.35 103.44 104.72 102.81
2Q19 3Q19 4Q19 1Q20 2Q20
Economic and Financial Report 2Q20
21
The NPL ratio decreased 0.15 p.p. down to 1.15% with respect to 1Q19. As for thecoverage ratio, it stood at 39.17% in the first quarter of 2020, after increasing by 0.11p.p. compared to the previous quarter. In terms of efficiency, the German financialsystem increased its ratio to 91.61% in 1Q20.
NON-PERFORMING LOANS RATIO AND COVERAGE RATIO (%)
In 1Q20, the NPL ratio stood at 1.15%, which represented a decrease of 0.15 p.p. when compared to 1Q19.Moreover, with respect to the previous quarter, the NPL ratio has decreased by 0.10 p.p..
The coverage ratio of the German financial system increased by 0.11 p.p. in the first quarter of 2020compared to 4Q19, amounting to 39.17%. The ratio registered in 1Q20 was 1.92 p.p. lower than the onerecorded during the same quarter of the previous year (41.10%).
According to the EBA´s Risk Dashboard for 1Q20, the NPL ratio of the German financial system stood belowthe EU average (2.97%), as well as the coverage ratio, of 45.98%.
In terms of efficiency, the ratio of the German financial system increased by 5.61 p.p. compared to 1Q19,totaling 91.61% during the first quarter of 2020.
According to the EBA, the German efficiency ratio stood at 91.61%, notably above the EU average during1Q20, which stood at 71.72%.
Source: European Banking Authority.
Note: Non-exhaustive analysis conducted by the EBA on the financial system of the country covering more than 80% of total assets. Entities considered in Appendix.
Indicates EU weighted average as calculated by the EBA.
Key ratios: NPL, Coverage and Efficiency*
NPL Ratio Coverage Ratio
EFFICIENCY RATIO (%)
Source: European Banking Authority.
Note: Non-exhaustive analysis conducted by the EBA on the financial system of the country covering more than 80% of total assets. Entities considered in Appendix.
EU weighted average: 71.72%
2.97%45.98%
*Most updated data available at the time of the reléase of the report corresponds to 1Q20
1.30% 1.30% 1.23% 1.25% 1.15%
1Q19 2Q19 3Q19 4Q19 1Q20
41.10%39.34%
39.78%39.06% 39.17%
1Q19 2Q19 3Q19 4Q19 1Q20
86.00%83.15% 83.64% 84.37%
91.61%
1Q19 2Q19 3Q19 4Q19 1Q20
22
116.00 116.00 119.00127.00
2016 2017 2018 2019
129.90
109.70 107.50 107.20
2016 2017 2018 2019
130.00
118.00
106.00
94.00
2016 2017 2018 2019
38.20 38.60 38.40 38.20
2016 2017 2018 2019
5. TelecommunicationsFixed and Mobile Telephony
In 2019*, the number of fixed connections decreased to 38.20 million (-0.52%) whereasmobile connections also experienced a decrease of 0.28%, decreasing its number ofconnections down to 107.20 million. During 2019, fixed traffic decreased by 11.32% to94 billion minutes. Mobile traffic experienced a considerable increase of 6.72% up to 127billion minutes. With respect to 2018 the external revenue of the sector grew by 0.70%.
The volume of fixed connections decreased by 0.20 million (-0.52%) during 2019 with respect to 2018, to 38.20million connections. Regarding traffic, fixed traffic saw a decrease of 11.32% during 2019, down to 94 billionminutes, which indicates the consolidates its downward trend.
In terms of mobile connections, a decrease of 0.30 million connections was registered, 0.28% less than thenumber of connections reported in 2018. During 2019 the number of mobile connections reached 107.2million. On the hand, mobile traffic increased by 6.72% to 127 billion minutes.
The number of broadband connections continued to grow, to 35.10 million in 2019, a y/y increase of 2.63%mainly attributed to the increase of FTTB/FTTH technologies (+27.27%, to 1.4 million of connections).
Furthermore, the fixed broadband data volume has expanded by 13.04% in 2019 compared to 2018, to 52billion GB of data. Mobile network data volume increased by 38.33% with respect to the previous year, to 2.76billion GB in 2019.
External revenue in the telecommunications market amounted to € 57.40 billion in 2019. This represented ay/y increase of 400 million (+0.70%). External revenue from mobile services grew to € 26.57 billion in 2019,increasing when compared to the 2018 volume of € 26.55 billion (+0.08%). In the conventionaltelecommunications networks segment, revenues increased by 0.56% to € 21.72 billion in 2019.
MAIN MAGNITUDES – Fixed Connections
Connections (Millions) Traffic (Thousands of
millions of minutes)
1.05%-0.52% -0.52%
-9.23%-10.17%
-11.32%
MAIN MAGNITUDES – Mobile Connections
Connections (Millions)Traffic (Thousands of
millions of minutes)
Source: Bundesnetzagentur.
Source: Bundesnetzagentur. NOTE: mobile connections data corresponds to SIM cards.
-15.55%
-2.01% -0.28% 0.00% 2.59%6.72%
* Annual frequency data.
Economic and Financial Report 2Q20
23
24
SOURCES
MACROECONOMIC OVERVIEW
Deutsche Bundesbank: www.bundesbank.de
Destatis: https://www.destatis.de/DE/Startseite.html
European Central Bank: http://www.ecb.int
International Monetary Fund, IMF: http://www.imf.org
Organisation for Economic Cooperation and Development, OECD: http://www.oecd.org/home/
World Bank : http://www.worldbank.org/
Standard & Poor’s: http://www.standardandpoors.com/
Fitch Ratings: http://www.fitchratings.com/
Moody´s: http://www.moodys.com/
Central Bank of the Republic of Argentina: www.bcra.gov.ar
Central Bank of Chile: www.bcentral.cl
Bank of Mexico: www.banxico.org.mx
Central Bank of Brazil: www.bcb.gov.br
National Administrative Department of Statistics of Colombia (DANE): http://www.dane.gov.co/
Bank of the Republic of Colombia: http://www.banrep.gov.co/
Central Bank of Venezuela: www.bcv.org.ve
Central Reserve Bank of Peru: www.bcrp.gob.pe
6. Appendix
TELECOMMUNICATIONS
Bundesnetzagentur: www.bundesnetzagentur.de
BANKING SECTOR
Deutsche Bundesbank: www.bundesbank.de
European Banking Authority (EBA): https://eba.europa.eu/
Entities considered for Efficiency and NPL ratios:
Aereal Bank AG, Bayerische Landesbank, Commerzbank AG, DekaBank Deutsche Girozentrale, Deutsche Apotheker‐ und Ärztebank eG, Deutsche Bank AG, Deutsche Pfandbriefbank AG, Deutsche Zentral‐Genossenschaftsbank AG, Erwerbsgesellschaft der S‐Finanzgruppe mbH & Co. KG, HASPA Finanzholding AG, HSH Nordbank AG, Landesbank Baden‐Württemberg, LandesbankHessen‐Thüringen Girozentrale, LandeskreditbankBaden‐Württemberg–Förderbank, Landwirtschaftliche Rentenbank, MünchenerHypothekenbank eG, NORD/LB NorddeutscheLandesbank Girozentrale, NRW.BANK, Düsseldorf, State Street Europe Holdings, VW Financial Services AG, Westdeutsche Genossenschafts‐Zentralbank AG.
©M
anagem
ent
Solu
tions
2020.
All
rights
reserv
ed.
Management Solutions is an international consultancyfirm focusing on providing business, risk, financial,organizational and process-related advice, both inrespect of functional components and in theimplementation of related technologies.
With a cross-functional team of 2,500 professionals,Management Solutions operates through 31 officesacross Europe (15), the Americas (15) and Asia (1).
Rafael GuerraPartner of Management [email protected]
Javier Calvo MartínPartner of Management [email protected]
Manuel Ángel Guzmán CabaPartner of Management [email protected]
Management SolutionsTel. + (49) 69 79539480www.managementsolutions.com
Our goal is to exceed the expectations of our clients by
being reliable partners
©M
anagem
ent
Solu
tions
2020.
All
rights
reserv
ed
27
