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Euro

Europe's largest banks are expected to maintain strong profitability levels in 2024 driven by resilient revenue generation, according to an analysis. 

In its latest report, US-based credit rating agency Fitch Ratings said that banks' mean operating profit/risk-weighted assets ratio is expected to remain stable at about 2.6 percent in 2024, comfortably above the long-term average, supported by still-strong net interest income and increasing fee income.
 
Strong Performance by Banks in H1

The analysis noted that most of the 20 large banks in Fitch's latest quarterly credit tracker performed financially well in the first half of this year. 

The report added that revenue generation was resilient in the first six months, despite declining interest rates, and cost, while asset quality pressures were generally contained.

"Cost/income ratios generally increased slightly in the first half, as inflation-led pressures continued, but typically remained below their long-term averages due to stronger revenue and structural cost-savings," said Fitch Ratings. 

Italian Banks Outperformed Peers

According to the report, Italian and Nordic banks, and HSBC performed exceptionally well in the first half of 2024, this trend is expected to continue in the remaining period of this year. 

On the other hand, the French banks, which lag behind peers, will have only moderate profitability improvements, while UK banks' earnings will generally continue to decrease from their strong levels.

"Net interest income continues to benefit from favourable deposit pricing in some jurisdictions, particularly Italy, Spain and the Benelux region, but deposit costs for French and UK banks have risen materially due to non-remunerated sight deposits migrating to interest-bearing savings account," said Fitch. 

It added: "Net interest margins peaked at a median of 1.4 percent in the first half, and should, in most cases, start to gradually decline in the second half, driven by tighter lending-deposit spreads."