Banks in Europe's largest economy have struggled to improve their high cost to income revenue, which reached 80% in 2018, and the report projected that this is unlikely to improve in the short-term.
In terms of share price, Deutsche Bank stock is down more than 80 percent over a ten-year period, while Commerzbank shares have lost nearly all its value over that period, with shares down nearly 90 percent. Moody's has downgraded its outlook for German banks to "negative" from "stable" as profitability and overall creditworthiness weaken in a low interest rate environment.
In a report published Thursday, the ratings giant said the already weak profitability of German banks will decline further over the next 12 to 18 months as net interest income falls. "Traditional commercial banks and in particular deposit-funded institutions will struggle to out-earn their costs in the continuing low interest rate environment, even though loan-loss provisions are unsustainably low," said Bernhard Held, Moody's vice-president and senior credit officer.