The latest supervisory data from the ECB shows that eurozone banks had weakened profitability, even before the Covid-19 pandemic hit. Marie Kemplay reports.
Return on equity (RoE), a key measure of profitability, fell for the first time in three years across the Eurozone’s largest financial institutions, according to the latest supervisory data, published by the European Central Bank (ECB) this month. RoE fell from 6.16% in the fourth quarter of 2018 to 5.20% in the fourth quarter of 2019 across the Eurozone’s ‘significant institutions’, with data measured at 110 banks in the fourth quarter of 2018 and 113 in the fourth quarter of 2019.
Low profitability has been a long-term problem for Eurozone banks, particularly when compared with US banks, which have been posting double-digit RoE.
Only Slovenia’s significant institutions achieved an RoE of more than 10%, at 10.36%. Three countries – Germany, Portugal and Greece – saw RoE of less than 1%, at 0.08%, 0.88% and 0.98% respectively.
These figures suggest that many of the Eurozone’s banks could be entering the current period of economic difficulty in a relatively vulnerable position.
