Frankfurt / Munich – European banks have still not shaken off all the legacies of the last financial crisis. Many loans at risk of default weigh on the balance sheet and weigh on business.
According to experts, the sluggish reduction of problem loans is increasingly becoming a threat to Europe’s banks.
“It’s about survival”
“For many banks it is about nothing less than their own future and long-term survival,” stated Philipp Wackerbeck of PwC Strategy in a study published on Wednesday by the strategy consultancy of the accounting firm PricewaterhouseCoopers (PwC).
“Only when the (…) necessary reduction measures are initiated can banks improve their financial health and focus on strategic and sustainable growth.”
Problem loans worth over one trillion euros
A decade after the recent financial crisis in 2007/2008, according to the experts’ calculations, non-performing loans (NPLs) in the books of European banks add up to more than one trillion euros. For Germany, this results in a volume of 68 billion euros, of which just under a third (30 percent) is not covered by risk provisions.
Problem loans are slowing down new lending business
Such problem loans are tending to slow institutions down in their willingness to lend new loans. Thus, the economy may lack important financial injections. The highest is the number of problem loans according to this list in Italy (276 billion euros), the lowest in Sweden (11 billion euros).
“Given the persistently low interest margins and increasing regulatory requirements, it is indispensable for banks to accelerate necessary reduction measures and implement them swiftly,” said Wackerbeck.
Net loan amount Euro
Loan term 12 months 24 Months 36 months 48 months 60 months 72 months 84 months 96 months 108 months 120 months
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