Profits for the banking sectors in most European countries fell in 2011, in some cases catastrophically. But there were a few countries that managed to buck the trend.
The French banking sector remained the largest profit generator in the eurozone in 2011, ahead of Germany. Outside the eurozone, the banking sectors of the UK and Switzerland also earned substantial profits in 2011. But in all four countries total profits fell when compared with 2010, as financial instability triggered by the eurozone sovereign debt crisis took its toll.
Inevitably, the countries in the eye of the sovereign storm saw a massive reversal in banking performance in 2011. Banking sectors in Greece, Italy, Cyprus and Portugal all fell from aggregate profits in 2010 to losses in 2011. As did Belgium, owing to the exposure of Dexia to eurozone peripheral debt, which forced the Belgian and French governments to bail out the bank.
Profits also fell heavily in Spain. It is a tribute to the resilience of the country’s large privately owned banks that the sector as a whole remained in profit, but those profits fell by almost 85%. As a result, the country earned the eight highest profits in our sample, down from the third highest the year before.
Only two eurozone countries managed to buck the trend. Profits in the Netherlands increased by more than 20%, as the country’s largest bank, ING, continued its recovery from a government support package in 2009, and the resurrected ABN Amro returned to profit for the first time since it was rescued in 2008 from the wreckage of the takeover by Fortis Bank.
Ireland remains a loss-making banking sector, but the government and Bank of Ireland (the largest to remain in private hands) have enjoyed considerable success in cleaning the system of bad assets. Hence losses were pared by almost 85% in 2011 despite the unsupportive international environment.
Outside the eurozone, only Sweden resisted the effects of Europe’s slowdown, increasing bank profits slightly. Perceived as a relative safe haven, Swedish banks have enjoyed significantly better funding costs than those of euro-area peers. But the effects of Europe’s troubles can be felt far beyond the eurozone itself. Even Turkey, the only emerging market in this sample, saw a marked decline in profits in 2011.
To find out more about the profound trends changing the global landscape, see our analysis of this year's Top 1000 World Banks ranking.
