In the fourth quarter of 2024, the CFS Index, which tracks the state of the German financial sector on a quarterly basis, reached its lowest level since the second quarter of the pandemic year 2020. While the decline of 4.4 points is not as dramatic as in 2020, revenue and earnings growth have fallen sharply, particularly among financial service providers. The financial sector is responding with decreasing expenditure on personnel and investments.
“The figures probably reflect the gloomy expectations for the economic situation and rising credit risks,” comments Prof Dr Andreas Hackethal, Director of the Center for Financial Studies, on the results.
At 91.3 points, the assessment of the future international importance of Germany as a financial centre in the fourth quarter of 2024 is at almost the same level as at the start of 2024. In the second quarter, sentiment had temporarily risen to 99.2 points. The differences are mainly due to the fluctuating evaluations of financial services companies, while the financial institutions’ assessments remain relatively constant.
“The entire German economy is facing enormous challenges, which naturally also impact the financial sector. Against this backdrop, the comparatively stable assessment of the future international significance of the financial centre is a positive sign, which is also reflected in the improvement position of the Frankfurt financial centre in the latest international ranking of the Global Financial Center Index (GFCI). Frankfurt is ranked tenth worldwide and is therefore the most important financial centre in continental Europe,” explains Oliver Behrens, President of Frankfurt Main Finance.
Revenue and earnings growth fell significantly in the fourth quarter / Service providers expect further declines
Revenue growth in the financial sector fell by -7.0 points to 107.3 points in the fourth quarter of 2024, now standing only slightly above the previous year’s level. This is primarily due to losses among service providers, which reported a decline in revenue growth of -12.1 points. The financial institutions reported a rather moderate decline of -1.9 points. Expectations for the current quarter are not very optimistic.
Earnings growth for the entire sector has also fallen significantly to 106.8 points, with service companies recording the sharpest decline of -10.4 points, as with revenue growth. The surveyed financial institutions recorded losses of -5.2 points compared to the previous quarter, marking 109.4 points for the fourth quarter. Despite the current significant growth losses in earnings, the financial service providers’ results are slightly above the previous year’s figures. In contrast, Financial institutions face a drop of 7.4 points compared to the previous year.
Growth in the investment volume of service providers falls below the neutral level of 100 points in the fourth quarter
The growth of investment volumes in product and process innovations by financial institutions decreased by -1.0 points to 106.9 points, which is -3.1 points below the previous year’s level. Investment growth among service providers is in a steady decline, falling below the neutral mark of 100 points for the second time this year with an index value of 97.1. The change compared to the same quarter of the previous year is -4.9 points. While the financial institutions anticipate an increase in investment for the current quarter, the financial service providers expect growth to remain negative.
In line with the overall situation, employee growth fell to 102.0 points. Individually, the reduction in jobs among service providers has continued since the last quarter. The sub-index stands at 93.6 points, marking the second-lowest value since the CFS Index was established in 2007. The financial institutions, however, remain slightly up at 104.7 points.
