Smaller savings and cooperative banks in Germany, traditionally have higher interest rate margins than the larger banks – around 1.5% of the balance sheet total as compared to 0.5% [Figure 5]. For the larger banks, the net interest margin has been relatively flat over the past decade. For smaller banks, it has declined quite significantly from almost 2.4% in 2014.
The net interest margins of these banks also recovered a bit recently, reflecting their higher pricing power in local markets. As regards the funding structure of German banks, Figure 4 has shown the shift from demand towards time deposits, which are more costly for banks but, potentially, also a more stable form of funding.