UniCredit is pursuing a growth strategy to create a pan-European banking leader, but political resistance to cross-border consolidation remains strong.

Spanish banks expect strong H2 results supported by higher-for longer interest rates and loan volumes recovering faster than expected. Asset quality continues to be strong so risks to profitability and organic capital generation are contained.

The recovery in net interest margins is taking longer than French banks initially anticipated, due to limited loan production and continuing migration of deposits to remunerated accounts, so improvements in cost efficiency are limited.

Efforts to address remaining items in the Covered Bond Directive continue. While the Directive has brought many benefits, there is still room for improvement, particularly for European Secured Notes, which could offer both banks and SMEs funding benefits.

Giving depositors preference in insolvency and harmonising national deposit guarantee schemes are among proposed steps to improve the process for dealing with failing banks. They also edge towards the goals of the European Deposit Insurance Scheme (EDIS).

Profits at the Russian operations of RBI, UniCredit, and OTP Bank, the European banks with the highest exposures to Russia, continue to increase despite regulatory pressure to expedite exit plans.

Italian banks are poised for strong profitability in 2024 thanks to higher-than-expected rates and resilient credit quality. After a strong first half, lenders are confident of matching or even beating last year’s full-year performance.

Green and social covered bond issuance hit USD13.4bn in the first seven months of the year, representing approximately one in 10 new issues. But there is pressure to enforce consistent and standardised ESG disclosures related to cover pools.

Changes to the way the ECB plans to determine banks’ capital add-on requirements to increase the efficiency and effectiveness of the supervisory process and to focus on risks that require greater attention are welcome developments.

EU policymakers remain steadfast in their conviction that deploying bank and institutional capital and retail savings through frictionless banking and capital markets union will create economic security. An EU MidCap Bond market should be a priority.