With an average Common Equity Tier 1 (CET1) ratio of 15.3% at the end of 2022 (14.8% in the third quarter) and an average liquidity ratio of 164.7% (162.4% in the third quarter), the European banking sector remains strong and its profitability, linked to the ECB’s interest rate hike, continues to increase, the European Banking Authority (EBA) noted in its ministerial financial risk scoreboard published on Tuesday 4 April.
However, the European authority notes that, since then, volatility in banking sector equities and debt levels has been “significantly affected” by the setbacks at US bank Silicon Valley Bank and Credit Suisse (see EUROPE 13149/1), although the sector’s exposure to these two banks is “limited”, according to supervisory data available at the end of 2022.
NPL. With regard to non-performing loans (NPLs), the ratio of impaired loans to total outstanding loans remained stable at 1.8% between the fourth and third quarters of last year. The ratio of bank loans at risk of becoming non-performing (‘stage 2 loans’) was reduced from 9.6 to 9.2% over the same period. (Original version in French by Mathieu Bion)