You are here

EU watchdog says bank capital rising, profitability falling

Thursday, April 7, 2016 - 07:21

ecb070416.jpg
Banks in the European Union continue to build up capital levels to well above mandatory minimums, but profitability remains poor and souring loans are a concern, the bloc's banking watchdog said on Wednesday in a regular quarterly update.

[LONDON] Banks in the European Union continue to build up capital levels to well above mandatory minimums, but profitability remains poor and souring loans are a concern, the bloc's banking watchdog said on Wednesday in a regular quarterly update.

The European Banking Authority (EBA) said the average common core equity to risk-weighted assets ratio rose by 60 basis points, quarter-on-quarter, to 13.6 per cent in the fourth quarter of 2015.

The rise was due to increasing actual amounts of capital and ditching risky assets.

The so-called fully loaded ratio, which factors in all changes in capital requirements now being phased in, was 13 per cent.

sentifi.com

Market voices on:

The regulatory minimum for the biggest banks is about 9 to 9.5 per cent but markets and regulators have pushed for higher levels as reassurance.

The average return on equity, a key measure of profitability, fell to 4.7 per cent for 2015 overall, down 1.7 percentage points from third quarter data and a far cry from the 20 per cent or higher seen before the 2007-09 financial crisis.

The ratio of non-performing loans or where the borrower has missed a payment, was 5.8 per cent, 10 basis points below third quarter levels.

"Notwithstanding the improvement, credit quality and the level of legacy assets remain a concern," EBA said in a statement.

The EBA figures are based on a sample of 154 banks.

REUTERS

Nespresso
Pair your daily business read with the perfect cup of espresso.

Subscribe to The Business Times today to receive your very own Nespresso Inissia coffee machine worth $188.

Find out more at btsub.sg/btdeal

Powered by GET.comGetCom