Net Interest Income Rally at European Banks-Will It Last?

DBRS Morningstar has released a commentary discussing the performance of European banks driven by increased net interest margins in 2023. Key highlights include:

-- Net interest income has driven strong earnings at European banks.

-- There is a significant divergence among European banks with regards to loan and deposits pricing, explaining the differences in performance.

-- Going forward, net interest income is set to decline in most countries, albeit to still healthy levels.

"The significant increase in European bank earnings over the past year was largely driven by a notable jump in the banks' net interest income, while credit costs have remained low" said Sonja Förster, Vice President, Global Financial Institutions at DBRS Morningstar. "However, for many banks a peak has been reached, in our view, given the repricing of loan portfolios that has already occurred, the catch-up of deposit rates and slowing loan growth in Europe."