Transatlantic trade tensions are contributing to a moderate deceleration in near-term economic growth in the European Union and euro area by around 0.4pps, even in a baseline scenario of the United States and the EU reaching a preliminary trade agreement.

European bank earnings will remain resilient in 2025, although we expect net interest margins to shrink. Given the low visibility around the impact of trade wars and geopolitics and the uncertain economic environment, risks remain skewed to the downside.

China is confronting several daunting challenges: persistent deflation, historically low interest rates, structurally declining economic growth and rising levels of government debt. This raises significant obstacles for economic stability.

The government’s commitment to fiscal discipline is challenged by a rising interest burden, an economic slowdown and a fragmented and uncertain political environment weighing on the country’s fiscal and reform outlook.

Higher mortgage rates have increased pressure on housing affordability. Longer fixed-rate mortgages periods limit the risk of shocks to the banking system and support the resilience of euro-area mortgage markets.

Germany’s ambitious defence and infrastructure borrowing plans will lead to a marked increase in its deficit and debt-to-GDP. Sustaining fiscal space over the long term will depend on associated growth effects but also pension and labour market reforms.

Competitive pressures have intensified but we still expect French banks’ profits to grow this year, supported by retail and corporate and investment banking. But profitability still lags EU peers, as large operating structures weigh on cost efficiency.

Wednesday, July 23rd 2025 - 3:00 PM (CEST)

Tuesday, July 15th 2025 - 3:00 PM (CEST)

Santander’s acquisition of TSB from Banco de Sabadell reflects a broader trend among EU banks of strengthening core markets via acquisitions, while for Sabadell, it represents a renewed focus on its domestic market.