2023 was a turbulent year for German banks, especially on the stock market. Pumped full of interest rate adrenaline from the interest rate turnaround, Deutsche Bank and Commerzbank started the stock market year in euphoria. Commerzbank's party mood culminated on 27 February in its celebrated return to the Dax, from which it had been kicked out around four and a half years previously. The image of the beaming and exuberant Commerzbank CEO Manfred Knof ringing the stock market bells is unforgettable.

But at the end of March, the party came to an abrupt end. The bankruptcies of Silicon Valley Bank and several US regional banks, as well as the emergency takeover of Credit Suisse by UBS, triggered panic in the stock markets. Scepticism towards the banking sector returned, the fear of a new liquidity crisis was palpable and German banks had their hands full trying to convince markets and investors that the bankruptcies were isolated cases. According to CEO Christian Sewing, Deutsche Bank then saw itself as the victim of a "speculative attack" when the bank's share price fell sharply.

The March bankruptcies indeed remained isolated cases. The markets recovered, and banks presented bubbling interest surpluses thanks to skilful interest rate arbitrage in the deposit business. One record quarter followed the next, and bank shares were once again in demand among shareholders. The recovery can be seen in the Stoxx Europe 600 Banks – an index that tracks the performance of Europe's largest banks. Since the beginning of 2023, it has risen by 19.4% to 168.65 points, returning to the level before the banking quake in spring.

Deutsche Bank and Commerzbank also benefited from the general recovery in the sector. However, with a price increase of around 16% over the course of the year, the Deutsche Bank share performed somewhat worse than the broad market. On the other hand, Commerzbank performed slightly better, with its share price rising by around 20%. This a setback for Deutsche Bank, even if it is still more valuable on the stock market at about 25 billion euros than Commerzbank, which only has a market capitalisation of around 13 billion euros.

However, as a particularly sensitive interest rate player, Commerzbank benefited more from the interest rate turnaround than Deutsche Bank, which depends more on the more volatile investment banking business. Both banks announced higher capital distributions to their shareholders this year – through higher share buy-backs as well, which have a price-supporting effect. This in itself is good news for shareholders who have been suffering since the financial crisis.

However, this is put into perspective as soon as the share price performance of the German banks is compared with the performance of their European competitors. Whether the Italian Unicredit (around 86%), the Spanish BBVA (around 46%) and Santander (around 36%), the French Crédit Agricole (around 31%) or the British HSBC (around 24%): They all posted higher share price gains than the two major German banks. Commerzbank can still claim partial success by having performed better than ING and BNP Paribas.

A closer look at the business figures reveals the unresolved structural problems of German banks. Put simply, compared to their European competitors, they are generating a low return on equity with a cost ratio that is too high. A concrete example: the high-performing equity firm Unicredit reported a cost/income ratio of 39% after the first nine months of 2023 – with a return on equity of 21.7%. And the Germans? Commerzbank needed a cost/income ratio of 60% in this period to generate a return on equity of 8.6% – and is, therefore, even better off than Deutsche Bank. Its cost/income ratio after nine months was 73%, with a return on equity of 7%. The turnaround in interest rates has concealed the structural problems of German banks but has not solved them. Shareholders have long since recognised this.