/EBA risk dashboard: EU banks have increased profitability
EBA risk dashboard: EU banks have increased profitability

EBA risk dashboard: EU banks have increased profitability

EBA Risk Dashboard EU banks have increased profitability

Compared to the previous year, the return on equity and improve the quality of the assets. The number of bad loans has also decreased. However, there remains an uncertainty factor.

According to the EU banking authority EBA, the financial institutions in Europe have increased their profitability despite the corona crisis. In addition to the economic recovery, numerous government support measures during the pandemic also contributed to this, the European banking authority EBA announced on Monday in its latest quarterly risk report (risk dashboard). Less value adjustments were the result.

Overall, the banks’ return on equity (RoE) improved to 7.7 percent in the third quarter of 2021 from 2.5 percent a year earlier. Before the pandemic, in the third quarter of 2019, the institutes’ return on equity was 6.6 percent according to the EBA.

The quality of the assets has also increased, the authority announced. In the case of bad loans, the rate has continued to decline. At the end of the third quarter of 2021, 2.1 percent of all loans on bank balance sheets were still classified as lazy after 2.8 percent a year ago. The data published by the EBA is based on a sample of 131 banks, which together represent around 80 percent of the industry in Europe.

According to the supervisory authorities, the spread of the Omikron variant of the Covid virus remains a factor of uncertainty. The EBA said it remains to be seen what effects the wave of infections caused by Omikron will have. There are concerns about loans that have benefited from moratoriums and government guarantees. There is also the risk of abrupt price corrections on the stock exchanges.

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This applies in particular to asset titles that show signs of overvaluation. In the short term, the outlook for lending and asset quality depends heavily on the Omikron variant and on government steps to stem its spread.

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