The primary activity of banks, lending, is finally becoming more profitable again, as the era of negative interest rates approaches in the eurozone, he recalls Bloomberg, Which collected the results of the second quarter of five major banks. The second-quarter result of France’s BNP Paribas was particularly strong, hitting a new record, and Italy’s UniCredit net profit soaring to a level not seen in nearly five years.
The five largest banks in the European Union generated a total of 3.74 billion euros in net interest income, which is a 17% increase compared to the same quarter last year. All of them beat analysts’ expectations for profit, despite both loan provisions and costs rising in most places.
Banks can thank the European Central Bank, which last week left the eight-year era of negative interest rates, for improving earnings. The region’s banks have faced this and have already in recent months begun to raise their loan rates to increase their profit margins. The five largest banks combined achieved a 50% increase in profits.
However, expectations are more modest. Deutsche Bank, for example, has warned of serious economic consequences if Russia stops gas deliveries to Germany. This scenario would increase risk costs by 0.2% of total loans this year and next, the equivalent of about 1 billion euros, CEO Christian Swing said in the bank’s earnings report on Wednesday. Banks will also have to raise interest rates on deposits, and may not have access to ECB-backed loans or targeted long-term refinancing operations, which have been an important source of income for them in recent years.
In addition, more and more politicians want to take advantage of the increasing profits of the banks to alleviate the escalating livelihood crisis. On Wednesday, Spain announced details of the new 4.8% tax on interest and fees charged to customers, Hungary has never seen a special freeze on bank tax and interest rates, while Poland and Romania have reintroduced credit bans.
A number of banks have yet to publish their quick report, so in addition to Societe Generale and Commerzbank, Erste, Raiffeisen and OTP are also releasing in August.
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