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European banks' capital ratios remain high with a slight decrease when compared to 2017. The CET1 (transitional) ratio was 14.6% in December 2018 (14.9% in 2017). The decrease is driven by an increase in the total risk exposure amount. CET1 ratios remained above 11% for all countries in the sample.
The quality of EU banks' loan portfolio continues to improve. In 2018, the ratio of non-performing loans (NPLs) to total loans kept the downward trend and reached a value of 3.2%, showing its lowest level since the NPL definition was harmonised across the EU/EEA. The NPL decline is attributed both to the upward trend of total loans granted and to the steady decline in the amount of non-performing loans (658 EUR billion in Q4 2018). However, dispersion across EU/EEA countries remained high, and economic slowdown could make further improvements harder to achieve.
Profitability showed only a small sign of improvement. The RoE increased to 6.5% compared to 6.0% in 2017. The heatmap shows that the share of total assets held by banks with RoE above 6% is 61.6%, which is an improvement compared to 46.7% in 2017. The dispersion narrowed in 2018, with the difference between the upper quartile and the lower quartile at 6% when compared with 7.4% in 2017.
The Leverage ratio remains stable. The leverage ratio (fully phased-in) in Q4 2018 stood at 5.3%, a marginal decrease from 5.4% in Q4 2017. The asset encumbrance ratio remained stable compared to 2017. The liquidity coverage ratio (LCR) continued its upward trend reaching 152%.
KRI - Risk parameters annex - Q4 2018_xls
KRI_Risk parameters annex - Q4 2018_pdf
EBA_Interactive Dashboard - Q4 2018_Protected