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Demographic Change and Bank Profitability. Empirical Evidence from German Savings Banks

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  • Michael Berlemann
  • Marco Oestmann
  • Marcel Thum

Abstract

Most European economies will experience significant demographic changes in the decades ahead. Due to low birth rates, populations are shrinking and ageing at the same time. This paper explores the impact of demographic change on the banking industry. A unique data set, which contains detailed information on almost 2.5 million accounts in 11 German savings banks, allows us estimating the socio-demographic determinants of retail profitability. Using a simulation model, we are able to predict the development of bank profitability due to demographic shifts up to 2025. One of the main findings is that the effects of population ageing will partially offset the impact of shrinking customer bases. While the decline in the size of the population reduces the customer base, ageing per se increases profitability as older customers typically generate higher profits for their banks.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2911.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2911

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Keywords: demography; banking; savings banks; profitability;

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  2. Lars-Erik Borge & Jørn Rattsø, 2007. "Young and old competing for public welfare services," Working Paper Series 8607, Department of Economics, Norwegian University of Science and Technology.
  3. Fehr, Hans, 1999. "Pension reform during the demographic transition," W.E.P. - Würzburg Economic Papers 8, University of Würzburg, Chair for Monetary Policy and International Economics.
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  19. International Monetary Fund, 2004. "Germany's Three-Pillar Banking System," IMF Occasional Papers 233, International Monetary Fund.
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