Net interest margin of EU/EEA banks slightly decreased on a quarterly basis

The European Banking Authority (EBA) today published its Q2 2024 quarterly Risk Dashboard (RDB), which discloses aggregated statistical information for the largest EU/EEA institutions.

• EU/EEA banks’ return on equity (RoE) remained nearly unchanged on a yearly basis, reaching 10.9%, 10bps lower than one year ago. On a quarterly basis the RoE increased by 30bps, mainly driven by a rise in other operating income.
• The net interest margin (NIM) declined slightly (1.68% in Q2 vs. 1.69% in Q1, 1.60% one year ago), indicating that it might have reached its peak in Q1 2024. As volume growth could not compensate for the negative impact from the NIM, net interest income declined slightly on a quarterly basis.
• EU/EEA banks’ common equity tier 1 (CET1) ratio rose on a fully loaded basis by 10bps to 16.1% in Q2 2024. The liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) similarly rose in the second quarter (from 161.7% to 163.2% and from 127.3% to 127.8%, respectively). In the LCR’s numerator, the share of cash and reserves held by EU/EEA banks further decreased, while the share of central government assets increased.
• Loans to households and non-financial corporates slightly increased over the quarter. Sovereign exposures increased since the end of last year by around EUR 200bn (+5.5%), accompanied by a rise of the share of exposures recognised at fair value, and a rise of the share of shorter-term maturities. The non-performing loan (NPL) ratio remained stable at 1.9%, with material divergences across segments.

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• Slide 1: RoE remained nearly stable on a yearly basis as the rise in net interest (NII), fee (NFCI) and trading (NTI) income compensated for a decline in other operating income. On the cost side, the contribution to deposit guarantee schemes (DGS) and resolution funds declined, which compensated for a rise in other expenses, including taxes. [DOWNLOAD DATA]
• Slide 2: The CET1 ratio increased in Q2, supported by a bigger increase of capital than risk weighted assets (RWAs). The latter was driven by its credit and operational risk components. [DOWNLOAD DATA]
• Slide 3: Whereas the overall NPL ratio remained stable on a quarterly basis, it further increased for exposures to small and medium-sized enterprise (SMEs) and commercial real estate (CRE) (from 4.5% to 4.6% and from 4.3% to 4.4%, respectively). [DOWNLOAD DATA]
• Slide 4: Within high quality liquid assets (HQLA), the share of cash and reserves further decreased and the share of central government assets further increased in Q2 2024. [DOWNLOAD DATA]

The figures included in the Risk Dashboard are based on a sample of 162 banks, covering more than 80% of the EU/EEA banking sector (by total assets), at the highest level of consolidation, while country aggregates also include large subsidiaries (the list of banks can be found here).