Strategie e performance di banche e intermediari finanziari - Strategies and performance of bank and financial intermediaries
18, Jan 2020

I problemi di redditività delle banche europee -

1579350050 profitability

La profittabilità rimane il problema principale delle banche europee. Lo evidenzia il Risk Dashboard (RD) pubblicato dall’EBA lo scorso 9 gennaio, che potete scaricare cliccando qui. Il RD evidenzia, con riferimento al terzo trimestre del 2019 ed al profilo di redditività delle banche, le seguenti, principali criticità:

  1. Margine di interesse

Supported by an increasing volume of interest bearing assets, but despite unchanged net interest margin (1.43%), the share of net interest income in total net operating income rose to 58.5%, which is 60bps higher than in the last quarter.

Banks' net interest income continues the upward trend initiated in 2018, driven by increasing lending volumes.

Despite their focus on rather riskier lending exposures, banks’ margins have not improved, amid the low rate environment and growing competition.

  1. Costi operativi

Banks' cost to income ratio contracted by 90bps from Q2, continuing a trend from the previous quarter. Still, it remains high at 63.2%.

They also appear to face challenges to further reduce costs amid necessary expenses related to ICT, governance and compliance.

  1. Costo del rischio

Costs of risk remained broadly stable at 45bps.

The cost of risk seems to revert the decreasing trend observed in previous years.

  1. ROE

Return on equity (RoE) further contracted. Banks' RoE in Q3 was 6.6%, down by 40bps from the quarter before.

Per quanto concerne le prospettive a breve termine, il RD rileva che:

Profitability prospects remain bleak.

Scope for growing fee and commission income appears limited in light of intense competition.

Banks’ ability to pass on negative central bank rates to their deposit base is often limited by commercial, reputational or legal constraints.

Some banking products are becoming highly ‘commoditised’ and, thus, subject to intense price competition.

Challenger banks and other FinTechs, which present some advantages over traditional banks such as state-of-the-art technology and no legacy operating infrastructures, exert additional competitive pressure. In order to compete with them, banks need to undertake costly ICT investments that may further dent profitability in the short term.

Banks additionally appear to face challenges to identify feasible avenues for further cost reductions.

Progress to address overcapacities in many banking markets appears limited.”

Come risolvere tutte queste criticità simultaneamente?

(English version)

Profitability remains the main problem for European banks. This is highlighted by the Risk Dashboard (RD) published by the EBA on January 9th, which you can download by clicking here. The RD highlights, with reference to the third quarter of 2019 and the profitability profile of the banks, the following main issues:

  1. Interest margin

Supported by an increasing volume of interest bearing assets, but despite unchanged net interest margin (1.43%), the share of net interest income in total net operating income rose to 58.5%, which is 60bps higher than in the last quarter.

Banks' net interest income continues the upward trend initiated in 2018, driven by increasing lending volumes.

Despite their focus on rather riskier lending exposures, banks’ margins have not improved, amid the low rate environment and growing competition.

  1. Operating costs

Banks' cost to income ratio contracted by 90bps from Q2, continuing a trend from the previous quarter. Still, it remains high at 63.2%.

They also appear to face challenges to further reduce costs amid necessary expenses related to ICT, governance and compliance.

  1. Cost of risk

Costs of risk remained broadly stable at 45bps.

The cost of risk seems to revert the decreasing trend observed in previous years.

  1. ROE

Return on equity (RoE) further contracted. Banks' RoE in Q3 was 6.6%, down by 40bps from the quarter before.

With regard to the short-term outlook, the RD notes that:

Profitability prospects remain bleak.

Scope for growing fee and commission income appears limited in light of intense competition.

Banks’ ability to pass on negative central bank rates to their deposit base is often limited by commercial, reputational or legal constraints.

Some banking products are becoming highly ‘commoditised’ and, thus, subject to intense price competition.

Challenger banks and other FinTechs, which present some advantages over traditional banks such as state-of-the-art technology and no legacy operating infrastructures, exert additional competitive pressure. In order to compete with them, banks need to undertake costly ICT investments that may further dent profitability in the short term.

Banks additionally appear to face challenges to identify feasible avenues for further cost reductions.

Progress to address overcapacities in many banking markets appears limited. ”

How to solve all these issues simultaneously?