The EU NPL ratio continues to be low and stable, but corporate NPLs are elevated in some core countries. At a time of rising geopolitical risk, trade tensions and an uncertain economic outlook, we expect a modest deterioration in asset quality.

We have a balanced base case for European banks going into 2026. Profitability is resilient, asset quality and capital buffers are solid. We have upgraded our profitability forecasts for 2026 and 2027. But several risk factors could test the outlook.

Thursday 11 December 2025 - 15:00 (CET)

The cut in minimum Long-Term Funding Ratio (WFD) requirements from 40% to 20% recommended by Poland’s Financial Supervision Authority and the inclusion of capped retail deposits come alongside bold measures to strengthen the covered bond market.

Profitability is set to remain strong in 2026. Moderate loan growth, steady fee expansion and stable costs will support profits. But we are projecting an increase in provisions as default rates normalise, while economic and other risks remain high.

ABN AMRO’s announced acquisition of NIBC Bank carries low execution risk and is marginally supportive of the group’s strategic development and long-term credit profile.

EU banks trail US peers in profitability amid rising compliance costs. So policymakers are pushing to simplify regulation. This could bring positive outcomes but the potential for missteps should not be overlooked.

European banks have little choice but to accelerate investment to adapt to digital payments now that the European Central Bank (ECB) plans a pilot phase for the digital euro in 2027.

Germany’s largest banks are poised for robust operating performance in the quarters ahead, resilience which they will need to absorb the relatively high cost of risk amid lingering concerns about asset quality, says Scope Ratings.

Climate change can materially affect the creditworthiness of all issuer types and asset classes, so we have harmonised our general framework for capturing this risk, which can be applied to produce issuer-specific Key Climate Risk Indicators (KCRIs).