August 13, 2012
Europe’s 20 largest banks reported weak H1 results overall. Despite the ECB LTROs’ positive effects, net interest income declined yoy at the majority of institutions, except those with substantial EM or Scandinavian exposure. Fee income fell by 4% and trading income by 20%, sending total revenues down 4%. Though most banks managed a (moderate) decrease in expense levels, globally active institutions still saw costs rising for a combined small increase of 1% (driven also by a weak EUR). Trends in loan loss provisioning were mixed.
Banks remain under substantial pressure on many operating fronts. Revenue declines seem to be becoming entrenched, due to volatile capital markets and the low interest rate environment. At the same time, initial improvements on the cost side have not nearly been able to compensate for those reduced earnings. One of the few bright spots is the further strengthening of capital levels: in spite of the application of Basel 2.5 rules, CT1 ratios are now 11.2% on average – 0.9 pp and 0.6 pp higher than at end-2011 and a year ago, respectively. Bottom-line profitability, however, is the weakest since 2009 (and even worse than in H1 2008), with net profit having slumped 27% yoy to just EUR 27 bn.
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14.06.2013
