ECB warns bank profits will ‘remain weak’ throughout next year
European banks will not see profits return to pre-pandemic levels before 2022, the region’s central bank warned Wednesday in its latest financial stability review.
Lenders in the euro zone have struggled to make sizeable profits over the last decade following the 2008 global financial crisis, with stronger regulatory scrutiny and low interest rates. However, the recent coronavirus-induced crisis has worsened bottom lines further and that will continue to be felt over the coming months, according to the European Central Bank.
“Bank profitability is expected to remain weak,” Luis de Guindos, vice president at the ECB, said in a statement on Wednesday morning.
Market expectations point to an overall return on equity (ROE) — a measure of banking profitability — of 1.7% this year, followed by 3.1% and 5% in 2021 and 2022, respectively. The ROE of euro area banks stood at around 6% in June of 2019, according to ECB data.
The banking system is seen as a key element to support the economic recovery in the wake of the pandemic. Many businesses will be looking for new funding to rebuild their work after months of being on stand-by.
Reference: CNBC
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