The consolidated non-performing loan (NPL) ratio of EU banks remained stable at a low level of 1.86% in the second quarter despite a rise in total NPLs to EUR 373.4bn, reflecting underlying volume growth.

UniCredit is pursuing a growth strategy to create a pan-European banking leader, but political resistance to cross-border consolidation remains strong.

Spanish banks expect strong H2 results supported by higher-for longer interest rates and loan volumes recovering faster than expected. Asset quality continues to be strong so risks to profitability and organic capital generation are contained.

The recovery in net interest margins is taking longer than French banks initially anticipated, due to limited loan production and continuing migration of deposits to remunerated accounts, so improvements in cost efficiency are limited.

Efforts to address remaining items in the Covered Bond Directive continue. While the Directive has brought many benefits, there is still room for improvement, particularly for European Secured Notes, which could offer both banks and SMEs funding benefits.

Giving depositors preference in insolvency and harmonising national deposit guarantee schemes are among proposed steps to improve the process for dealing with failing banks. They also edge towards the goals of the European Deposit Insurance Scheme (EDIS).

Debt markets are slowly reopening for Europe’s commercial real estate companies, but investor confidence is yet to recover to pre-2022 levels given the prevalence of high leverage, heavy capital expenditure and questions over governance at some issuers.

Corporate defaults across Europe are likely to continue rising in the months ahead before stabilising around year-end as financing conditions ease on stronger economic growth, more subdued inflation and companies’ self-help measures.

Profits at the Russian operations of RBI, UniCredit, and OTP Bank, the European banks with the highest exposures to Russia, continue to increase despite regulatory pressure to expedite exit plans.

Italian banks are poised for strong profitability in 2024 thanks to higher-than-expected rates and resilient credit quality. After a strong first half, lenders are confident of matching or even beating last year’s full-year performance.