rate increases brought European banks additional profits of €110 billion – Kommersant

In 2023, European banks’ net interest income – the amount received from interest on loans minus the amount paid as interest on deposits – rose 40% thanks to rising interest rates. Writes about this Financial Times with reference to preliminary calculations by the Swiss bank UBS. The increase in rates brought banks additional profits of almost €110 billion. If in 2021, that is, before the Central Bank began raising key rates, the net income of European banks was €270 billion, then this year, according to UBS estimates, it will reach €378 billion. Thanks to this, banks increased dividend payments to shareholders: from €90 billion in 2021 to €121 billion this year.

At the same time, experts note that, despite the growth in income, the market capitalization of European banks still lags significantly behind their American competitors. “European banks have outperformed the market by more than 50% (since the end of 2020— F.T.), yet they are still trading at a level that implies earnings 30% below our forecasts,” said UBS analyst Jason Napier.

This is due, among other things, to the fact that banks expect European Central Banks to cut rates in the spring of 2023, which will lead to a decrease in interest income. In addition, fears of a recession, low demand for loans, a possible increase in capital requirements and an increase in the number of bankruptcies at the beginning of the year.

Yana Rozhdestvenskaya