EBA updated Risk Dashboard shows EU banks have further increased their capital ratios in Q4 2015

06 April 2016

The European Banking Authority (EBA) published today the periodical update of its Risk Dashboard summarising the main risks and vulnerabilities in the banking sector on the basis of the evolution of a set of Risk Indicators (RI) across the EU in Q4 2015. The update shows a further increase in EU banks' capital ratios. Profitability remains low and NPL ratios are still high.
 
Banks' ratio of common equity tier 1 (CET1) rose further by 60bps to 13.6% in Q4 2015, driven by an increase of capital and a decline of RWAs (ratios are weighted average). The ratio of non-performing loans (NPL) was 5.8%, 10bps below Q3 2015. Notwithstanding the improvement, credit quality and the level of legacy assets remain a concern. The coverage ratio for NPLs improved by 10bps to 43.8% in Q4 2015 (compared to the former quarter). Dispersion is still wide among countries (between 30% and over 65%), but narrowed among banks of different size class (between 42% and 45%).
 
The average return on equity (RoE) was 4.7% in Q4 2015, 1.7 percentage points lower than in Q3 2015, but higher than 2014 level (3.5%). The average return on assets (RoA) was 0.29% in Q4 2015 (0.20% per year end 2014 and 0.38% in Q3 2015).
 
The loan-to-deposit ratio decreased to 120.9%. It was 2.3 percentage points below Q3 2015 level. The asset encumbrance ratio increased again to 25.6% in Q4 2015 (25.3% in the former quarter) and showed an even further widening dispersion among countries.
 
The figures covered in the Risk Dashboard are based on a sample of 154 banks at the highest level of consolidation, while country aggregates may also include large subsidiaries (the list of banks can be found at https://www.eba.europa.eu/risk-analysis-and-data). The Risk Dashboard is part of the regular risk assessment conducted by the EBA and complements the Risk Assessment Report.