Banking Study 2025: Between Profit and Risk

The key findings of the study include the following:

Strengthened capital and equity positions

• The average total capital ratio rose to 23.5% in 2024, marking the third consecutive year of improvement – a clear sign of growing sector resilience.
• Equity capital increased by 4.7%, driven by retained earnings. Germany (+15.4%) and the Mediterranean region (+11.7%) showed particularly strong growth.
• Most banks have successfully reinforced their capital base, preparing for future regulatory and economic challenges.

Stable earnings amid rising costs

• Despite rising personnel and IT costs, many institutions managed to maintain or even grow their net profits.
• Earnings before tax (EBT) increased by 0.5%, signaling a phase of stabilization.
• However, return on equity (RoE) declined slightly by 0.8 percentage points, reflecting the tension between profitability and capital growth.

Commission income gains strategic importance

• Commission income rose by 6.9%, becoming a key driver of profitability, especially in asset management, securities, and consulting.
• Spain and Portugal (+15%) and Germany (+8.3%) led the way in commission growth.
• Smaller banks outperformed larger institutions in terms of net income growth, mainly due to more efficient cost structures.

Robust liquidity buffers

• The liquidity coverage ratio (LCR) reached an average of 230%, well above the regulatory minimum of 100%.
• Smaller banks maintained even higher LCRs (up to 264%), reflecting conservative liquidity strategies.
• The net stable funding ratio (NSFR) also improved to 146%, ensuring medium-term stability across all bank sizes.

Accelerated digital investment

• IT spending increased by 7.2%, driven by strategic investments in cloud, AI, and cybersecurity.
• Austria (+13.2%) and Switzerland (+16.4%) led the digital investment trend.
• These investments lay the groundwork for future efficiency, innovation, and compliance with regulations like DORA.

Sustainability gains momentum

• The green asset ratio (GAR) averaged 2.5% across European banks, with larger institutions showing higher values.
• Sustainability is no longer a niche topic – it’s becoming a core component of strategic planning and portfolio alignment.
• Banks with better data access and larger corporate clients are structurally advantaged in ESG reporting.

Rising risk provisions and regional divergence

• Risk provisioning increased by 1.7%, driven by geopolitical and macroeconomic uncertainties.
• The Balkans and Baltics (+123.3%) and Benelux (+37.1%) saw the sharpest increases.
• Germany recorded the highest growth in non-performing loans (+24.9%), reflecting a rise in corporate insolvencies and real estate risks.

Regulatory pressure intensifies

• New frameworks, such as CRR III and DORA, are reshaping capital planning, risk management, and digital resilience.
• Banks must go beyond compliance – strategic clarity and execution are essential to remain competitive.
• Institutions that treat regulation as a catalyst for transformation will be best positioned for the future.