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EU Bank Profitability Hit Record Just as ECB Started Rate Cuts

The profitability of Europe’s top banks hit a record high just as the European Central Bank cut interest rates for the first time in almost five years.
Bloomberg
By Bloomberg
23 Sep
Germany's Financial Capital as Ruling Political Class Mulls Fiscal Stimulus Frankfurt 16.10.2019 Bank district Alex Kraus/ Bloomberg News

Aggregate return on equity for the 110 lenders directly supervised by the ECB hit 10.11% in the second quarter, data published by the regulator on Monday showed. That’s the highest level since the ECB started publishing the data almost a decade ago.

Profitability of EU Banks Hits Another Record High |

The boom demonstrates just how much higher interest rates have boosted European banking, with the ECB saying on Monday that the profitability increase was driven by net interest income. However, with monetary policy officials at the ECB having cut a key rate to 3.5% from 4% since the middle of June, the question is how long the tailwind will persist.

Several banks have said that they expect interest income to eventually taper off while also saying that it’s expected to remain above pre-rate hike levels.

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