French banks’ profits will grow moderately in 2025, supported by net interest income and commissions, notably in corporate and investment banking. But improvements in profitability could be slowed by the subdued performance of the domestic economy.

The impact of higher financial and political volatility on Türkiye’s credit ratings will mostly depend on the effectiveness of the monetary policy response and the consequences of any potential shifts in domestic economic policy.

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.

Germany’s ample fiscal space to finance higher defence spending by issuing debt contrasts with the more constrained public finances in France and the United Kingdom unless both governments make significant budgetary adjustments.

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.

Spain's proposed EUR 83bn debt relief for autonomous communities, equal to 25% of total regional debt, is credit-positive as it will reduce the regions’ debt burden but it risks moral hazard, underscoring the need for financing reform.

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

Germany’s fiscal stimulus to decisively address its longstanding investment gap and immediate security needs could lead to EUR 625bn of new debt over five years, or 13% of GDP. However, sustaining long-term growth potential will require further reforms.

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.