European Banking Outlook for 2024 - Ongoing Good Performance, but Pressure on Deposit Margins

DBRS Morningstar has released a commentary on the outlook for European banks in 2024. Key highlights include:

-- We expect European banks' earnings to remain strong in 2024, albeit at lower levels than in 2023, due to some margin pressure and sluggish loan growth, as well as higher expenses and credit costs.

-- Banks' liquidity should remain solid, despite pressure on deposit pricing, as loan demand is subdued amid higher rates and weak economies.

-- Capital ratios continue to benefit from banks' strong earnings generation, which is largely offsetting pressure to increase dividend payouts and share buybacks.

"Banks have benefitted from strong earnings in recent quarters, but we expect asset quality to deteriorate gradually due to the higher interest rates and continued weakness in most European economies, with the impact becoming more visible in the banks' corporate loan portfolios" said Sonja Förster, Vice President, Global Financial Institutions at DBRS Morningstar.