MPS’s hostile all-share bid for Mediobanca to form Italy's third-largest financial institution faces high execution risk due to differing business models and challenges in achieving sustainable synergies.

The planned asset-management joint venture between BPCE and Generali supports BPCE’s strategic focus on business diversification, strengthening its franchise, growing its revenue base and addressing its profitability gap relative to other French peers.

European banks’ solvency profiles are generally robust. Strong profitability and RWA optimisation have supported capital positions and facilitated higher dividend payouts and share buybacks.

Banks are well positioned to weather a potential deterioration in the credit cycle. Scope’s bank ratings and issuer outlooks are largely stable, reflecting balanced upside and downside risks.

The consolidated non-performing loan (NPL) ratio of EU banks remained low in Q3 2024 but marginally rose quarter on quarter from 1.86% to 1.88%, according to most recent EBA data. Banks added EUR 2.7bn of new NPLs, bringing the total stock to EUR 376bn.

We are constructive on European covered bond ratings. European banks entered 2025 in solid shape, while a stable European economy will support rating levels. But investors will need to remain vigilant for risks that could catch the market off guard.

Large European banks could see their pre-tax credit portfolio return on assets completely wiped out in the long run from the impacts of climate change on their lending portfolios.

Commercial real estate will stabilise in 2025. Refinancing risk will remain elevated for the office sector but improving financing conditions and good fundamentals will improve access to capital for other sectors.

Tuesday, January 21st 2025 - 3:00 PM (CET)

Italian NPL collections increased by 8% month-on-month to EUR 187m in November, continuing the trend observed over the past two years. However, volumes were 21% lower than the average for the same month in the 2022/2023 period.