Austria’s leading banks entered the pandemic in reasonably solid shape and were able to set aside sizeable loan impairment provisions. On top of this, the government enacted generous policy measures to help ease the country through the crisis.
Nonetheless, the Austrian economy still contracted by 6.3% in 2020, which was slightly higher than the EU average. Amid growing competition in financial services, as fintechs develop their offerings, and a rising household debt-to-income ratio, return on equity (ROE) in the banking sector dropped markedly.
The biggest fall was at Bank Austria, owned by UniCredit Group, which saw ROE decrease from 8.37% in 2019 to 0.18% in 2020. Erste Group, the country’s largest lender, saw ROE drop from 9.33% to 4.58% year-on-year, while Bawag Group’s fell from 12% to 6.53%, according to The Banker Database.
A general decline in ROE can be seen in several Austrian banks in recent years, as the eurozone grapples with tepid growth and low rates. At Raiffeisenlandesbank Oberosterreich Aktiengesellschaft, for example, ROE fell to 3.42% from 11.16% between 2017 and 2020, while at Raiffeisen Bank it dropped to 6.36% from 11.08% over the same period.
Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4,000 of the world's leading banks in 190 countries. Contact us.
