Scope NPL Heatmap
NPL Ratio of EU Banks remains close to the historical low at 1.85%
This research inaugurates a new quarterly series that outlines the primary insights on non-performing loan (NPL) formation, based on Scope’s analysis of the EBA’s Risk Dashboard.
Non-performing loans (NPLs) for EU/EEA banks increased to EUR 364.9bn by the fourth quarter of 2023, according to the EBA’s 4 April Risk Dashboard. The rise (EUR 2.2bn quarterly; EUR 7.5bn annually) was minimal relative to the consolidated EU-level NPL ratio, which edged up from 1.81% to 1.85%, close to the historic low of 1.75% in March 2023.
Despite the moderate increase, this marks a reversal of the long-term trend of improving asset quality. Although a modest economic rebound is expected in the latter half of 2024, driven by anticipated rate cuts, NPL formation is likely to continue rising moderately this year due to a time lag.
The situation varies by country: Germany (+EUR 4bn) and Austria (+EUR 1.8bn) saw the largest NPL increases in Q4 2023, though their NPL ratios only reverted to December 2019 levels. In contrast, the Netherlands (-EUR 1.2bn) and Italy (-EUR 1.7bn) continued to improve.
The overall NPL increase was primarily from corporate exposures, while retail exposures remained resilient despite the economic slowdown. Finland and Sweden experienced the largest rise in retail NPL ratios, whereas reductions in the Netherlands and Italy improved the overall situation.
There is no widespread deterioration of NPL ratios by corporate sector, though real estate and construction remain areas of concern. NPL ratios for ‘Other EU/EEA countries’ showed moderate increases in some places (Luxembourg, Norway) and continued improvement in 11 countries, notably Greece, Ireland, and Portugal.
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https://scoperatings.com/ratings-and-research/research/EN/176831
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