EU watchdog says bank capital rising, profitability falling
[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.
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
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Banking & Finance
DBS CEO Piyush Gupta sells S$2.7 million worth of bank shares
Over S$646,000 spent to store, maintain, safeguard assets in money laundering case
Philippines eyes US$2 billion in its first global bond this year
UniCredit jumps past 60 billion euro market cap to join elite club
New Thai finance minister downplays row with central bank
China's CICC may cut investment banking headcount by at least 10% this year