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European banks: Operating struggles and some external headwinds

January 15, 2019
Region:
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]

More documents from Jan Schildbach

67 (37-48)
March 19, 2015
Region:
37
Core revenues are getting better, loan losses are falling substantially and capital ratios have climbed to sustainable levels – European banks seem to have turned the corner in 2014, finally. Profits have more than doubled, asset growth has also resumed and banks have regained a bit of risk appetite. The outlook for 2015 is thus brighter than in most of the past few years. The still-elevated expenditure levels remain a significant drag on performance, though. [more]
December 5, 2014
Region:
38
2014 is witnessing a remarkable reversal in some important European banking trends of the past few years, according to the 9-month results of the continent’s largest banks. This is not solely a positive thing: apart from improvements in core revenues and a return to balance sheet expansion, expense levels are also rising again. Is deleveraging and shrinking over, then? [more]
August 20, 2014
Region:
40
The half-year results of large European banks offer ammunition to both optimists and pessimists: loan losses and administrative expenses are shrinking, but so are total revenues. Net interest income, the sickly child of recent years, finally seems to be stabilising; however, net income is down again to poor levels. The state of an industry with two distinct faces. [more]
June 25, 2014
Region:
41
Current results are still very weak, with total revenues and profits both at the lowest level since 2009. But the largest European banks can justifiably draw hope from a stabilisation in interest income as well as fees and commissions, from declining loan loss provisions and shrinking expenses. The bottom line may have broadly bottomed out, though pressure from litigation charges and the ECB’s balance sheet assessment remains high. New record capital levels abound. [more]
April 1, 2014
Region:
42
The fundamental transformation of the European banking sector into a leaner, less profitable, low-growth but also more stable industry in the “new normal” continues to make progress. Banks are shedding assets, reducing costs and raising capital ratios, with revenues in 2013 having declined for the third consecutive year. Legacy assets and litigation remained an additional, significant burden. Nonetheless, profitability has improved somewhat from its extremely low levels and may well rise further this year. [more]
December 16, 2013
Region:
43
Following years of struggle and having seen their world turned upside down, European banks may finally be heading for a (somewhat) smoother ride in 2014. Profitability is returning, though so far this is mainly driven by lower extraordinary charges rather than improvements in revenues and costs. Pressure to build capital may lessen thanks to significant progress over the past two years, yet currently banks are still shrinking relentlessly. Much will also depend on regulatory and supervisory actions, especially on how the EU Banking Union is implemented. [more]
September 26, 2013
44
Five years after the global financial crisis hit both the US and Europe, banks across the Atlantic are in very different shapes. US banks have returned to record profit levels, while their European peers are struggling to stay above the zero line at all. The differences are mainly driven by diverging trends in revenues, corporate lending growth and loan loss provisions all of which have developed much more favourably in America than in Europe. This may have been caused largely by three underlying factors: i) the better macroeconomic performance of the US, ii) European banks' less aggressive dealing with problematic legacy assets and their greater need to deleverage and shrink, and iii) differences in the institutional setup - in Europe at times triggering doubts over the very survival of the Monetary Union, in the US allowing the Fed to massively intervene in financial markets. As the US economic recovery gains strength and Europe emerges from the debt crisis and recession, banks face improvements on an operating level, with EU financial institutions likely to narrow but not close the gap to their US competitors. [more]
June 11, 2013
Region:
45
Since the height of the financial crisis at the end of 2008, the use of different debt finance instruments by companies in the euro area has been diverging remarkably: whereas the outstanding volume of traditional bank loans has fallen by about EUR 360 bn on aggregate (-7.4%), net issuance of corporate bonds (i.e. long-term debt securities) has amounted to almost exactly the same cumulative (but positive) figure over the same period of time (a rise by 63%). [more]
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