- The EBA released its Q1 2024 Risk Dashboard (RDB) and Risk Assessment Questionnaire (RAQ), highlighting key financial metrics and risk factors for EU/EEA banks.
- Profitability: Return on Equity (RoE) was 10.6%, slightly higher than the previous year, supported by widening margins and lower contributions to Deposit Guarantee Schemes (DGS) and resolution funds (RF). However, future profitability may decline due to anticipated interest rate cuts.
- CET1 Ratio: Remained stable at 15.9%, bolstered by strong organic capital growth.
- Liquidity: Net Stable Funding Ratio (NSFR) increased to 127.2%, while Liquidity Coverage Ratio (LCR) decreased to 161.4%, due to changing asset compositions.
- Lending: Loans to households and non-financial counterparties decreased by 0.2% QoQ, but banks plan to increase exposure in most segments except commercial real estate.
- Non-Performing Loans (NPLs): Increased by 2% QoQ, particularly in the SME segment, with the cost of risk rising to pandemic levels. Further asset quality deterioration is expected in commercial real estate, SME loans, and consumer credit.
- Operational Risk: Increased, with cyber risks and data security being top concerns. Fraud has become a significant operational risk driver.
- Banks are also concerned about potential operational costs and reduced fee income associated with the introduction of central bank digital currencies (CBDCs) and indirect effects from non-bank financial institutions (NBFIs).
