EBA欧洲银行-EBA-Risk-Dashboard-Q3-2013_26页_4mb

RISK DASHBOARD Summary - Q3 2013 (Data as of Q2 2013)

Core Content

The EU banking sector has shown some improvement in capital positions over the past two years, but remains fragile due to the weak and uneven economic recovery across the region. While capital ratios have increased, asset quality and profitability continue to be major concerns, and the balance sheet structure is gradually changing. Funding conditions have improved but are still vulnerable to adverse developments.

Main Risks and Vulnerabilities

Capital

• Tier 1 Capital Ratio (KRI 1):

  • The weighted average Tier 1 ratio increased to 12.6% from 10.2% in December 2009.
  • The 25th percentile rose from 7.9% to 10.0%, indicating a rise in Core Tier 1 (CT1) capital.
  • However, capital is unevenly distributed across countries, with some banks having a T1 ratio below 9%.
  • The ratio remained stable at around 12.5% in the first half of 2013.
  • A few banks reduced T1 capital in Q1 2013 due to changes in accounting and regulatory treatment.

• Tier 1 Ratio (Excluding Hybrid Instruments) (KRI 3):

  • The weighted average rose to 11.1% from 9.0% in December 2009.
  • The 25th percentile increased from 7.9% to 10.0%, indicating a rise in CT1 capital.
  • The 75th percentile increased from 10.7% to 12.6%, showing a broad improvement.
  • However, some banks still have a Tier 1 ratio below 5%.

• Total Capital Ratio (KRI 2):

  • The weighted average increased to 15.1% from 13.0% in December 2009.
  • The 25th percentile rose to 12.0%, and the 75th to 16.8%, showing a wide range.
  • Despite this, some banks still have a total capital ratio below 9%.

Credit Risk and Asset Quality

• Impaired Loans and Past Due (>90 days) Loans to Total Loans (KRI 13):

  • The weighted average increased from 5.4% to 6.7% from Q2 2011 to Q2 2013.
  • Over the last six months, the ratio increased from 6.4% to 6.7%, due to an increase in the numerator and decrease in the denominator.
  • Around 42% of gross impaired loans are covered by specific allowances, but banks with a coverage ratio below 25% account for about 14% of total assets.

• Coverage Ratio (KRI 14):

  • The weighted average coverage ratio was 42.8% in June 2013.
  • The 25th percentile was 33.7%, and the 75th was 50.7%, showing a wide dispersion.
  • The coverage ratio has generally been stable but shows some fluctuations.

• Impairments on Financial Assets to Total Operating Income (KRI 21):

  • The weighted average increased to 13.8% in June 2013 from 1.6% in December 2009.
  • The ratio has remained relatively stable, but some banks show higher impairments, which affect profitability.

• Impaired Financial Assets to Total Assets (KRI 18):

  • The weighted average increased from 1.7% to 2.1% from Q2 2011 to Q2 2013.
  • The ratio has continued to deteriorate over the past six months.

• Accumulated Impairments on Financial Assets to Total (Gross) Assets (KRI 20):

  • The weighted average increased to 17.7% in June 2013 from 12.5% in Q2 2011.
  • The ratio has been fluctuating, but shows a general upward trend.

Profitability

• Return on Equity (RoE) (KRI 22):

  • The weighted average RoE increased from 0.5% in December 2012 to 3.8% in June 2013.
  • However, this improvement is attributed to one-off events, such as those in Greece.
  • Persistent low interest rates and declining lending volumes continue to pressure net interest margins.

• Cost-to-Income Ratio (KRI 24):

  • The weighted average cost-to-income ratio was 2.8% in June 2013, down from 9.4% in December 2009.
  • The ratio has generally decreased, but some banks still show a cost-to-income ratio above 66%.

• Net Interest Income to Total Operating Income (KRI 16):

  • Decreased by 8% from H1 2012 to H1 2013, from 61% to 56%.
  • The decline is due to low interest rates and reduced lending.

• Net Fee and Commission Income to Total Operating Income (KRI 17):

  • The ratio remained relatively stable, but showed some improvement in June 2013.

• Net Income to Total Operating Income (KRI 19):

  • The ratio remained below 1% in June 2013, indicating continued profitability concerns.

Balance Sheet Structure

• Loan-to-Deposit Ratio (KRI 34):

  • The weighted average decreased from 115.7% to 114.2% over the past six months.
  • The 75th percentile declined from 141.7% to 130.5%, indicating a shift in the balance sheet structure.

• Debt-to-Equity Ratio (KRI 45):

  • The weighted average decreased from 17.9 to 17.5 over the past two years.
  • The 75th percentile decreased from 18.1 to 17.5, showing a general trend of deleveraging.

• Customer Deposits to Total Liabilities (KRI 46):

  • Increased from 42.7% to 45.4% over the past six months, indicating a shift in funding sources.

• Off-Balance Sheet Items to Total Assets (KRI 46):

  • The weighted average remained below 10%, but showed some fluctuations.
  • The ratio has generally decreased, indicating a reduction in off-balance sheet exposure.

Key Risk Indicators (KRIs) Overview

Key Risk Drivers

• Asset Quality: Deterioration in asset quality continues to be a concern, with some banks experiencing significant increases in impaired loans and past due loans.
• Credit Risk: The coverage ratio for impaired loans has been stable, but remains below 25% for some banks, indicating potential risks.
• Profitability: Low interest rates and reduced lending volumes continue to pressure net interest margins.
• Funding Conditions: Although improved, many banks still rely on central bank funding, and funding markets remain fragmented.
• Regulatory Environment: Uncertainties regarding regulatory initiatives and the leverage ratio persist.
• Sovereign Risk: The link between banks and sovereigns has weakened but not been broken, with some banks still exposed to sovereign risk.

Forward Trends

• Capital: Expected to remain stable, with some banks potentially reducing capital due to ongoing regulatory changes.
• Credit Risk: Asset quality is expected to continue deteriorating, especially in economically weak regions.
• Profitability: Expected to remain low due to ongoing macroeconomic challenges and low interest rates.
• Funding Conditions: Expected to remain fragile, with potential for fragmentation and uneven cost conditions.
• Regulatory Environment: Expected to see continued implementation challenges and uncertainties.
• Sovereign Risk: Expected to remain a concern, with potential for further exposure to sovereign debt issues.

Conclusion

The EU banking sector has shown some improvement in capital positions, but remains fragile due to the uneven economic recovery and ongoing risks in credit quality, profitability, and funding conditions. The sector is expected to continue facing challenges, especially in asset quality and profitability, and regulatory uncertainties are likely to persist. The risk of sovereign debt issues and fragmentation of funding markets also remains a concern.