Several decades may be required in order to eliminate the problem of unserviced debts faced by banks in the European Union, analysts warn the Dutch auditing company KPMG. According to their estimates, cited by Bloomberg, now the volume of overdue loans in their portfolios reached €1.2 trillion ($1.3 trillion).
The solution to the problem of overdue loans is complicated by the slow growth of the European economy combined with very low interest rates, explain the experts of the company. In addition, pressure and changes in banking legislation, in particular, the tightening of capital requirements and increasing fines for violation of regulatory requirements. All this adversely affects the profitability of credit institutions.
According to KPMG, the share of problem loans in the portfolios of European banks increased from 1.5% of total loans in 2008 to over 5% in 2013. the reduction in the volume of risky loans will take “decades, rather than years.”
To restore the profitability of European banks is possible, but to achieve this, most likely, succeed with great difficulty, the partner of KPMG, Marcus Evans. “It is clear that Europe’s banks are still adjusting to the new era of low or negative interest rates, increasing the cost of capital and compliance with regulatory requirements,” he explains.
According to KPMG, the net interest income of banks in Europe is on average about 1.2%, while the indicator of the American — 3%.
That side effects of low interest rates could exacerbate the already serious problems with the profitability of the banking sector and, consequently, reduce the reserves of banks and undermine their ability to maintain growth in the beginning of the month warned the international monetary Fund (IMF) .
According to the head of research firm Autonomous Stuart Graham, which led the Economist in early October, difficulties with income due to low interest rates experience of almost all European banks, regardless of their size. The most vulnerable are banks engaged in traditional business attraction funding through deposits and lending to generate income. The impact of low interest rates varies from country to country, says Graham, is vulnerable of all were the German and Italian banks. In particular, the income shares of the German savings banks, it is estimated, will be reduced from the current level of 6.5% to 2% by 2021.