Demographic Change and Bank Profitability. Empirical Evidence from German Savings Banks
AbstractMost 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 InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2911.
Date of creation: 2010
Date of revision:
demography; banking; savings banks; profitability;
Other versions of this item:
- Michael Berlemann & Marco Oestmann & Marcel Thum, 2014. "Demographic change and bank profitability: empirical evidence from German savings banks," Applied Economics, Taylor & Francis Journals, vol. 46(1), pages 79-94, January.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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