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.

The recent collapse of First Brands, in casting a shadow over the direct-lending sector in the US, raises important questions: does the rapid growth in private credit amplify corporate credit risk and will this be different in Europe compared with the US?

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).

The uncertain political environment is likely to constrain market sentiment in Q4 2025, potentially dampening the earnings momentum French banks built in the first half, supported by strong revenues from retail banking, insurance and wealth management.

Aligning the tracks of Europe’s digital finance landscape will reinforce the euro’s global role, increase resilience against economic fragmentation and enhance European autonomy. Slow movers among European banks could face revenue and funding pressures.

Less dilution of equity capital certificates issued at a discount to book value would support savings banks’ credit profiles, but maintaining the cap on ECC holder representation on supervisory boards could have negative implications.

Germany, the Netherlands and Belgium need far more investment to modernise their electricity transmission grids through 2034 than southern European countries, hence the importance of having secured most of the EUR 200bn-plus in required funding.

Corporate NPL ratios remain high, particularly in Germany, France, Austria and Belgium, while geopolitical risks and trade tensions have rendered the economic outlook uncertain. Our baseline of a moderate deterioration in asset quality remains intact.

Following MPS’s acquisition of Mediobanca and BPER’s takeover of BPSO, we expect Banco BPM to play a more active role in Italy’s banking consolidation wave, which is being driven by financial as well as strategic and political factors.

US plans to slap hefty tariffs on pharmaceutical imports have led European firms to speed up US investment and reset supply chains, the full credit impact of which will depend on the products targeted and whether the extra costs compromise innovation.