News Digest:

European banks delivered strong results in Q4 2024, marking the second consecutive year of double-digit return on equity. This level of profitability, last seen before the global financial crisis, reflects sound credit fundamentals, effective risk management, and strong regulatory frameworks. Positive financial performance led to favorable rating actions and improved market sentiment in both equity and debt capital markets.

Key trends from 2023 continued, with high net interest income and growing fee income supporting revenues. Banks have actively managed deposits and hedging strategies to mitigate the impact of declining policy rates. While a slight erosion of net interest income is expected in 2025, increasing fee income should help offset losses. Cost control remains a priority, with some banks reducing costs despite inflationary pressures. Credit costs remain stable, and default trends show limited increases.

Major banks like UBS, Societe Generale, and HSBC continue restructuring, while stronger players like UniCredit and BNP Paribas pursue growth opportunities. However, risks remain, including geopolitical tensions, trade tariffs, and market volatility. Banks with weak business models, narrow lending focus, or high exposure to sovereign risks may be more vulnerable to economic downturns. Despite these uncertainties, European banks are expected to sustain solid profitability and strategic growth.

End Notes

Source: https://www.spglobal.com/ratings/en/research/articles/250312-european-banks-power-through-uncertainties-13440428