Spanish banks’ net interest margins reached their lowest level in Q1 vs 2024, yet profitability continues to improve, driven by higher loan volumes, sustained growth in fees and commissions and strict cost discipline.

UK bank profitability will remain sound in 2025. Asset quality is weakening modestly but remains resilient, capital is adequate and deposit outflows have reversed. The stable outlooks on our UK bank ratings indicate that risks are broadly balanced.

Bolt-on acquisitions and investments will improve the group’s diversification and consolidate its pan-European market position, but transformational deals remain complex and subject to political barriers.

Italian banks are among the most profitable in Europe and the outlook is favourable, even if we anticipate lower profits in coming quarters. M&A may reshape the sector, though execution risks are rising.

Operating environment assessments, the starting point for the analytical process, reflect regulatory and supervisory convergence. Ratings are determined by economic, sector and bank-specific factors. Despite uncertainties, the picture is resilient.

Wednesday, 28 May, 3 pm CEST

The robust solvency of European banks and their capacity to absorb credit losses from ordinary profitability provide important buffers against credit deterioration at a time when US trade policy is impacting Europe’s growth and interest-rate outlook.

European households will see housing affordability deteriorate as the supply-demand gap persists and prices continue to rise. Stimulus measures are urgently needed to boost housing supply in European countries where the situation is particularly acute.

The sharp correction in European banks’ share prices following the announcement of US tariffs on EU imports reflects mounting investor concerns about the potential implications for asset quality and profitability in a traditionally high-beta sector.

French banks’ profits will grow moderately in 2025, supported by net interest income and commissions, notably in corporate and investment banking. But improvements in profitability could be slowed by the subdued performance of the domestic economy.