Euro area bank return on equity rises to 10.73 percent
Euro area significant institutions posted an annualised return on equity of 10.73 percent and a Common Equity Tier 1 ratio of 16.00 percent in the second quarter of 2026. The European Central Bank published its aggregate supervisory banking statistics on Tuesday.
Profitability reaches series high
Annualised return on equity at significant banks reached 10.73 percent in the second quarter of 2026, up from 10.02 percent in the previous quarter and marking the highest level since the time series began in 2015.
The profitability increase was supported by an 8 percent year-on-year growth in both net interest income and net fee and commission income, while the net interest margin remained flat at 1.54 percent.
The cost-to-income ratio dropped to a series low of 53.06 percent, as operating income expanded 6 percent while administrative expenses and depreciation rose 4 percent.
Profitability varied across member states, ranging from 7.41 percent in France to 16.64 percent in Spain.
Stable default ratios and higher buffers
Asset quality remained steady with the non-performing loans ratio standing at 2.17 percent, down by one basis point from the previous quarter despite a €7.65 billion rise in non-performing loans, as total lending grew by €429.27 billion.
The liquidity coverage ratio rose to 154.91 percent, supported by an €87 billion increase in liquidity buffers.
Aggregate Common Equity Tier 1 ratios edged up to 16.00 percent, while the European Central Bank introduced combined system-wide statistics covering both significant and less significant institutions.
Peak returns meet persistent fragmentation
Euro area lenders are reaping the rewards of elevated interest margins, pushing operating efficiency to decade highs.
Yet wide national divergences in profitability and capitalisation highlight that banking integration remains incomplete.
As credit volumes expand, supervisors must watch whether asset quality holds once rate tailwinds fade.
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