“The largest European banks can justifiably draw hope from a stabilization in interest income as well as fees and commissions, from declining loan loss provisions and shrinking expenses. The bottom line may have broadly bottomed out, though pressure from litigation charges and the ECB’s balance sheet assessment remains high. New record capital levels abound,” the DBR team explains.
DBR points out that lenders are making progress in other areas, like net interest income, which is stabilizing ( less than 2% yoy in Q1). And revenues would in fact have increased were it not for the collapse in trading income. Also, global economy is picking up and outlook is positive for 2014.
Among all challenges ahead, banks face potentially high litigation costs, very difficult to anticipate. On this grounds, as well as because of the upcoming ARQ and ECB’s stress tests, lenders are eager to strengthen their capital buffers.