Germany's weak economy is dragging down the banking industry, leading to a potential decline in returns over the next two years.

According to a study by the consulting firm Oliver Wyman, the return on investment in the German banking industry is expected to shrink in the next two years due to declining revenue and rising costs. Revenue in the industry is projected to decrease by 4% this year and next year, as interest rates drop and loan growth stagnates. At the same time, expenses may increase by 2% annually as the growth rate of compensation exceeds the rate of employee reduction. As more companies go bankrupt, provisions for bad debts will also increase. These findings underscore the challenges facing the German banking industry against the backdrop of Germany, the largest economy in Europe, struggling to recover growth. Germany's largest bank, Deutsche Bank Aktiengesellschaft (DB.US), stated in January that it may cut underperforming departments after abandoning a key efficiency target for the year to improve profitability. In Europe as a whole, although slowing profit growth suggests that bank profits may have reached their peak, large banks achieved another record year of performance in 2024.