The rating agency Standard & Poor's (S&P) expects the credit ratings of most German banks to remain stable despite their persistently weak profits.

In the next two years, rating changes are unlikely, S&P announced in Frankfurt on Wednesday. The banks' profits should improve slightly in 2024. However, due to inefficient cost structures, overcapacity and fierce competition, profitability remains a relative weak point for the German banking sector.

"We expect a slight increase in credit losses from low levels," explained the rating specialists. Commercial real estate is a risk area for some German banks - but not a systemic risk. In S&P's view, German banks have benefited considerably from higher interest rates in recent years. However, this support will peak in 2024. "We expect pressure on interest margins as financing costs rise slightly faster than average bank lending rates."

The ECB raised interest rates again for the first time in July 2022 as part of the turnaround in the fight against high inflation. By September 2023, it had raised the key rates by a total of 4.50 percentage points in a series of ten consecutive steps. The banks have benefited greatly from this. The financial market now assumes that the monetary authorities will cut interest rates again for the first time in the spring.

S&P assumes that Deutsche Bank and Commerzbank will achieve more consistent and predictable yields, thereby improving their resilience. The rating agency also expects cooperative banks and savings banks to gradually recover from the valuation losses on long-dated securities, which would have temporarily weighed on profits in 2022.

(Report by Frank Siebelt; Edited by Ralf Banser; If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)