Fitch Ratings-London-28 May 2025: Large European banks continue to show resilience amid weaker macroeconomic prospects and the fallout from US tariff announcements, Fitch Ratings says in a new report. We expect 2025 profitability only slightly below 2024 levels, supported by strong revenue generation and a solid 1Q25 performance.
The median operating profit/risk-weighted assets ratio for the 20 large banks in Fitch’s latest quarterly credit monitor increased to 3.3% in 1Q25 (1Q24: 2.9%). Growth in fee income continued, driven by high customer activity across most business lines, while trading operations benefitted strongly from market volatility as uncertainty over tariffs triggered sharp swings in currency, bond and stock pricing.
Earnings at most of the banks are likely to moderate through the rest of 2025. Central bank rate cuts will generally lead to lower net interest income, particularly for southern European banks, although French banks and some UK banks may fare better. We also expect a slight rise in loan impairment charges, and credit demand will be muted as corporates continue to defer investment decisions. However, trading income should continue to be strong, at least in 2Q25, as financial markets remain volatile due to tariff uncertainty.
Asset quality remained stable in 1Q25, and we expect only slight deterioration throughout the year. That said, there could be pressure on corporates in the real estate, automotive and retail sectors.
The banks’ average common equity Tier 1 ratio was 14.4% at end-1Q25, indicating a position of strength despite significant share buy-backs, higher dividend payouts and the first effects of Basel rule implementations for EU-based and Swiss banks. Strong capital, coupled with revenue pressure and limited growth prospects, will continue to encourage M&A among European banks, and further acquisitions of insurers or asset managers.
Información extraída de: https://www.fitchratings.com/research/banks/large-european-banks-resilient-amid-weaker-macroeconomic-outlook-28-05-2025
