Il European banking system progresses on the road to its relaunch, a process which, however, does not appear to be concluded yet. The RoE achieved on average in 2017 is higher than that of the previous year but for almost all operators it is still far from adequately remunerating the capital employed. In the aftermath of the 2008-09 crisis, many hypothesized an intensification of mergers and acquisitions. In other words, a repeat of what happened between the mid-XNUMXs and the beginning of this century was imagined. The hypothesis has not found confirmation. For various reasons, both domestic and cross-border aggregation operations are missing, the latter to a more intense extent.
In addition to the well-known cases of Greece, Cyprus and Portugal, the German case still stands out among the less brilliant situations in the European scenario: if Germany were excluded, the average RoE of European banks would increase to a non-negligible extent. Many of the banking institutions at the top of the system find themselves in a condition of fragility. The qualitative leap that the European financial circuit seems to need may derive from the combination of two trends. The first is that of the downsizing and rationalization of the banking system; the second is the development of financing methods other than bank credit. If the development of the first trend certainly cannot be said to be impetuous, the progress in the development of the second is decidedly weak. The implementation of the Action Plan for a Capital Market Union has begun but is proceeding slowly, a circumstance which makes it unlikely that the expected deadline (end of 2019) will be met for the achievement of the objectives set.
Il European banking system ended 2017 taking a further step forward on the road to its relaunch, a process which, however, does not appear to be concluded yet. Compared to the previous year, the result appears to have more than doubled on average, but two-thirds of this progress can be referred to extraordinary items. Net of these components, RoE (Return on Equity) is just under 7%, 1,7 percentage points higher than the previous year. The dynamics of operating income was overall weak due to the limited contribution provided by credit intermediation and the securities portfolio. As regards the return on interest-bearing assets, the EBA survey highlights that if on the one hand the downward phase seems to have ended, on the other hand it is positioned at the lowest levels of the three-year period (at 1,48%).
The performance of commissions and the final balance of trading activity offered a limited compensation but basically only to larger banks and mainly belonging to the three main EU countries (France, United Kingdom and Germany). The 11 Italian banks considered by the EBA stand out on the European scene due to the significant contribution of commission income (approximately 35% of the intermediation margin compared to a European average of 28%) and, vice versa, due to the negligible contribution of trading revenues (approximately 4% compared to a European average of 8,5 .15% and a French figure above XNUMX%).
At the same time, the quality of the loan portfolio recorded an appreciable improvement, mainly attributable to the dynamics of the numerator (amount of irregular loans). Indeed, according to EBA data, a growth in the European loan portfolio of around 3% was combined with an 18% reduction in irregular loans. All the EU countries participate in the decline of this second aggregate, but the contributions of Italy (almost 40% of the total contraction) and Spain (16%) are decisive. The capital strengthening prompted by the 2008-09 crisis can be considered largely completed. In EBA statistics, the CET1 ratio in the fully loaded version at the end of 2017 was on average 14,6%.
Both contributed significantly to the improvement in the ratio (it was 11,5% at the end of 2014). the growth of the numerator (Core Equity Tier 1 capital) and the reduction of the denominator (exposure to risk). The 25% of the banks that find themselves in the least favorable condition have a value of the ratio (on average) higher than 13%; no bank is below 11%; institutions located in the upper part of the distribution are positioned (on average) at 20%. Among the seven countries below the average value is also Italy which, however, proposes a more prudent financial leverage ratio than the average found in the rest of the EU (13,9 times compared to a European average of 15, with Germany above the 18 mark).
The dynamics of the 2008-09 crisis has in many cases underlined that the stability of credit intermediaries also depends to a significant extent on the relationship between loans granted to households and businesses and the deposits collected from this same type of customer. The acquisition of a more prudent balance between the two aggregates is still incomplete. The average figure achieved is starting to be acceptable (117% at the end of 2017) but it is the expression of a decidedly too wide range of variations: the fourth of the institutes in the most delicate condition shows (on average) a ratio of 175% (192% at the end 2014).
SOURCE:Focus Bnl
