We expect a modest deterioration in EU banks’ asset quality, mainly driven by rising pressures in the EU corporate sector. But a worsening of the global operating environment could accelerate this deterioration, increasing credit risks for the banks.

While Spanish banks achieved record profitability in 2024, Q4 results suggest that net interest margins and customer spreads have peaked. Increasing fees and commissions will be key to profitability, given lower rates and competitive pressure on lending.

The financial landscape is undergoing momentous change. European banks must navigate these shifts carefully to maximise profitability while mitigating risks.

Europe’s real estate firms find funding respite but refinancing challenge looms; covered bonds provide stability in turbulent times; non-prime office segment faces rising vacancy rates; what can Frederick the Great tell us about today’s capital markets?

UK bank profitability will remain high in 2025, supported by net interest income, a recovery in loan growth and positive contributions from structural interest-rate hedges. But profits will likely decline from previous highs.

We expect Deutsche Bank’s performance to be more predictable this year but focus on cost efficiency is needed to avoid cost slippage. Frontloading non-operating costs weighed on 2024 results but should help bridge the gap to 2025 strategic targets.

With valuations at their highest in years and interest rates falling, Italian banks are seeking new levers of value creation, which has led to a surge in M&A and upbeat financial forecasts. In this context, increased risk-taking could pose challenges.

BPER Banca’s all-share bid for its smaller rival Banca Popolare di Sondrio could be beneficial for both banks, although the risks of sub-optimal tie-ups are increasing in the current market environment.

Georgia’s microbank framework is designed to enhance financial-sector competitiveness, expand the range of product offerings and services, and support entrepreneurs and the self-employed, driving economic growth.

A digital euro can strengthen the resilience and autonomy of Europe’s payment ecosystem and preserve the relevance of European banks. But it also has a potential to weaken bank profitability, increase costs, and accelerate runs on deposits in a crisis.