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Banks in Europe face a more difficult business environment in 2019 than last year. While the macro environment is still decent, momentum is cooling markedly. In addition, prominent political risks loom dangerously. On the operating side, banks are treading water. Their limited cost savings are being fully absorbed by declining revenues, and balance sheets continue to shrink despite a moderate pickup in lending. Profitability and capital levels are both stagnating. Only in a benign economic and political scenario will banks be able to return to growth this year. [more]

Christmas is only a few days away, and everyone is rushing to buy presents for family and friends. The tills are ringing and the card terminals are buzzing. But how safe is it to pay by card? [more]

Ahead of and during the UN Climate Summit at Katowice, the usual warnings were heard, saying that a reduction in global carbon emissions was urgently necessary. However, these political calls are much too vague. Instead, the most inconvenient message remains unsaid: The technologies which are available today and in the foreseeable future will, in all probability, prove insufficient to counteract climate change to the necessary extent and with the necessary speed and, at the same time, allow households to stick to their consumption patterns and continue with the well-established division of labour along international production chains. [more]

Steady growth in air transport is leading to capacity bottlenecks, both in terms of available planes and at individual airports. Capacities will need to be increased, which means that more money must be earmarked for fixed-asset investments as well as labour and operating expenses. Taken together, the growing pains in the aviation sector and the rise in jet fuel prices may prove an overwhelming chal-lenge for some market participants. Air transport growth has also resulted in higher capacity utilisation in related sectors, such as tourism (the “overtourism” phenomenon comes to mind). There are, in fact, discussions about limiting or redirecting visitor flows. [more]

The European banking industry remains in restructuring mode. Most institutions are focused on increasing profitability and returns to shareholders. In contrast to previous periods of rising net income, the key this time is exiting less attractive parts of their business rather than expanding across the board. Hence, most P&L and balance sheet components have declined year-over-year, with one major exception: profits. Capital levels have suffered from new, more conservative accounting rules on loan loss provisions. [more]

The European Parliament's Environment Committee agreed on setting stricter CO₂ emission limit values for new passenger cars. By 2030, CO₂ emissions shall be reduced by 45% compared with 2021. The targets overshoot the mark. Besides lacking economic efficiency, they are ineffective in terms of meeting the ecological goals. [more]

The extraordinarily hot and dry summer weather will cause severe crop shortfalls in Germany, according to experts' estimates. Due to the adverse weather conditions, the crop outlook for European neighbouring countries, as well as other large food producers such as the USA or Australia, is quite poor, too. Over the past weeks, wheat prices for delivery in December 2018 were up by just under 20%. [more]

European banks had a patchy start to the year. The common theme of Q1 performance was the continued slight shrinkage of the industry, visible in many core indicators. Overall results were solid though, showing further progress in asset quality and resilience in light of tighter regulation (IFRS 9). [more]

Several aspects of the European data protection regulation GDPR could have far-reaching implications for competition in the EU’s data economy and the competitiveness of the bloc’s tech industry and AI startups. Data protection “made in Europe” could give European companies a competitive edge as users become increasingly privacy-aware. But GDPR could also end up rather strengthening the position of incumbent tech giants and throw the continent further behind the US and China in the emerging race for global AI dominance. If potential negative implications of the regulation for the EU’s data economy materialize, EU lawmakers should not hesitate to make adjustments accordingly. [more]

The third and fourth pipeline strings for Russian gas transports through the Baltic Sea to Greifswald/Germany, which are also known under the term of “Nord Stream 2”, are now under construction, doubling the existing transit capacity of Nord Stream 1. The project continues to be highly controversial, given arguments that it might drive a wedge between the EU countries, the United States’ opposition and the risks it poses to the triangle of energy, environmental and security policies. That – also thanks to Germany’s initiative – Russian gas flows through the Ukraine look set to continue following the expiry of the old contracts in 2019 is a step forward and may foster acceptance of Nord Stream 2. In the face of the recent realignment of global gas trading, this would be in the interest of (nearly all) players. [more]

At 0.3% qoq, German GDP growth in the first quarter of 2018 slowed markedly compared with 2017, when GDP rose by an average of 0.7% per quarter. Whilst this was partially attributable to temporary factors, the large number of vacancies is gradually becoming a stumbling block for the German economy. Manufacturing, in particular, has been hard hit of late, with the number of job openings in the first quarter of 2018 up by 38% on the same period a year earlier. [more]

The major European banks have seen their revenues stabilise in 2017, and through further cost-cutting and improvements in asset quality, their profitability rebounded strongly to the second-best figure in the past decade. However, banks continued to shrink, and both total assets and risk-weighted assets fell substantially. This helped capital and leverage ratios to reach new record highs, finally laying questions about the sector’s capitalisation levels to rest, at least on aggregate. Large European banks lost ground versus smaller competitors and also remained far behind their US peers, although they were able to catch up somewhat on this front. [more]