The European Union’s biggest banks managed to set another record profit for the year as interest rates remain high and lenders grow fee-based businesses, according to LuxTimes.
Total net profit at the region’s 20 biggest banks rose 7.1 per cent last year to 110 billion euros, according to data compiled by Bloomberg News. That growth followed a 36 per cent jump in 2023.
While the slowdown in profit growth suggests that peak bank earnings may have already been reached, lenders have generally managed to limit the immediate impact of falling interest rates. Some have invested in profit-generating businesses, such as asset and wealth management or consultancy, to reduce their reliance on lending income.
“Earnings resilience continues despite lower rates,” Barclays analysts including Flora Bocahut said in a note published on Monday.
They expect the sector’s profitability, as measured by return on tangible equity, to fall only slightly this year to 13 per cent from an average of 14 per cent in 2024.
Rising profits over the past year have also allowed banks to increase the amount of money they return to depositors. According to Bloomberg Intelligence analyst Ilia Shchupko, 20 banks in the sample announced €18.4bn worth of share buybacks in the first two months of this year, up 29% from the same period last year.
“Several banks announced dividend and share buybacks that beat” expectations, the Barclays analysts said. They estimate that the 40 banks they cover will pay out about €264 billion to investors over the next two years.
Spanish bank Banco Santander made the highest profit in absolute terms last year at €12.6bn. French rival BNP Paribas came second with €11.7bn.
The strongest growth came from Société Générale, whose net profit jumped 69 per cent after posting some of the weakest results across the sample last year. Deutsche Bank saw the sharpest decline as profits were hit by legal settlement costs.
