Deutsche Bank har analyseret de europæiske bankers regnskaber. Bankerne havde en hård tid i 2020, men det ser bedre ud for dette år. Hensættelserne var meget store i bl.a. tyske og nordiske banker, mens de var meget små i sydeuropæiske banker. De var måske for store nordpå og for små sydpå, og det vil så afspejles i regnskaberne i år. Indtjeningen på aktiehandel steg hele 29 pct. for hele 2020. Den øvrige indtjening steg kun moderat, men til gengæld fik bankerne reduceret omkostningerne.
European banks: Shaking off the shackles of the past year, looking ahead to a better 2021
2020 ended on a conciliatory note for European banks. Following a heavy hit in H1, H2 saw a dynamic recovery in the economy and financial markets, which helped slow down the rise in loan loss provisions and buoyed trading income. The outlook for 2021 is more benign with bank profitability set to rebound significantly thanks to much lower loss provisions.
European banks are wrapping up the books for 2020 and one might expect to hear an occasional sigh of relief.
In European banks’ P&L, the ups and downs of the past year are visible for instance in loan loss provisions and financial market performance (whereas trading activity was very strong throughout the year).
As full-year reporting has just started, the 9-month figures can serve as an indication. For Europe’s 20 largest banks, they already show that following a 150% increase in loss provisions in H1, they only rose by less than 25% yoy in the third quarter (some banks were even able to release some reserves, i.e. reported negative net new loan loss provisions).
On aggregate, this amounts to more than a doubling in Q1-Q3. Remarkably, banks that typically have a relatively sound asset quality hiked their provisions to a greater extent than banks which usually see larger impairments.
In the first basket, which includes banks from Switzerland, Germany, the Benelux and the Nordic countries, loan loss provisions surged by more than 300% yoy in the first nine months of 2020. French banks stood in the middle as their provisions more than doubled. In the other corner, which includes Italian and Spanish institutions, provisions surprisingly increased by only about 60%.
In light of the experience in the aftermath of the financial crisis and the European debt crisis, when elevated provisions proved a prolonged burden particularly for banks in southern Europe, it remains to be seen whether banks in the first group have been too cautious or the latter have been too optimistic and have to follow through with additional provisions later on.
The swing in equity markets from record levels last February to the crash in March and a recovery to new record levels towards the end of the year is reflected in trading income. It fell in Q1, turned around in Q2 and after nine months, it was up a whopping 29% yoy in total.
The biggest revenue component, net interest income, witnessed the opposite effect. A stable start turned into a 5% contraction after three quarters, primarily as a result of interest rate cuts in the US and central & eastern Europe, a stronger euro and lower dividend income, in addition to continuing margin pressure. Fees and commissions dipped 1% yoy. Bottom line, total revenues were slightly in the red (-1%), while banks managed to cut costs by more (-3%) which is encouraging looking ahead at more normal provisioning levels. All in all, net income slumped 61%, but was at least substantially positive compared to the minimal loss recorded in H1.
With regard to capital and liquidity, European banks remain well positioned. Not least thanks to large-scale credit guarantees by governments, a massive rebound in capital market valuations and reduced derivatives volumes, risk-weighted assets at the end of September were 2½% lower than a year ago. The absolute capital base remained almost stable, benefiting from the recovery in profitability in Q3 and the retention of dividends for the year 2019 which had already been accounted for.
Taken together, this led to an increase in the fully loaded CET1 capital ratio of 0.6 pp yoy, to a very robust 14.1% on average. Driven mainly by banks’ enormous liquidity holdings at central banks, the Liquidity Coverage Ratio (LCR) climbed 5 pp to 157%, a new high since its reporting started in earnest in 2017.
