Large European Bank Earnings to Reduce Slightly for 2025 –Fitch
Most of the 20 large European banks in Fitch Ratings’ latest quarterly credit monitor performed well in 1H25. Revenue generation was resilient to declining interest rates, and cost and asset quality pressures were generally contained.
Fitch expects profitability to remain robust in 2025, but that metrics will fall to slightly below 2024 levels for most banks.
The main driver of this will be smaller net interest margins (NIMs), partially offset by growing lending volumes and strong trading income.
NIMs have already begun to decrease and are likely to fall further through the rest of 2025, mainly due to tighter deposit spreads.
French banks will continue to have some of the tightest NIMs, while margins will be higher than average for Spanish and Italian banks.
“We expect lending growth to pick up, as credit demand increases on the ongoing interest rate reduction cycle and increased clarity on global trade policies”. Fitch stated that corporate and investment banking divisions have performed strongly due to heightened market volatility.
The rating agency said trading income is likely to remain robust in coming quarters and will partially offset lower net interest income, following a trading revenue surge at most universal banks – with client activity reaching multi-year highs.
Asset quality remains sound, with the median impaired loans ratio stable at 2.3% at end-June 2025. Fitch forecasts only a slight rise to 2.5% by end-2025 as sector-specific challenges persist.
“We expect loan impairment charges to increase, but to stay within banks’ guidance, reflecting moderate pressures and continued geopolitical uncertainty”, Fitch said. Lafarge Africa Shrinks Amidst Legal Tussle