The data shows a rise in capital ratios, a contraction of the NPL ratio, and a return on equity (RoE) below banks’ cost of equity. Besides asset quality and profitability, operational risks remain a concern going forward.
The CET1 ratio reached a new level of 15.5% on a fully loaded basis, up by 40bps QoQ. The leverage ratio (on a fully loaded basis) increased to 5.8% from 5.5% in the previous quarter.
The NPL ratio decreased by 20bps to 2.6%. The decline was due to a contraction in NPLs, which exceeded the decrease in loans and advances. NPL ratios declined for both households and non-financial corporates (NFCs). While the NPL ratio improved for most economic sectors it increased for accommodation and food services (up from 7.8% to 8.4% QoQ) and arts, entertainment, and recreation (up from 6.7% to 7.2%).
Loans under EBA eligible moratoria nearly halved in Q4 of 2020. They declined from around EUR 590 billion in Q3 to around EUR 320 billion in Q4. The decline was more pronounced for NFC exposures than for loans to households. Loans under public guarantee schemes (PGS) reached about EUR 340 billion, up from around EUR 290 billion in Q3.
The liquidity coverage ratio (LCR) reached 173.1% in Q4 (171.2% in Q3). The loan to deposit ratio declined from 113.6% in Q3 2020 to 112.2% in Q4, supported by a rise in client deposits from households and NFCs. The asset encumbrance ratio remained unchanged at 27.9%.
Phishing attempts and other types of cyber-attacks are becoming more common. The increase in remote customer onboarding and a rising participation in virtual currency transactions may expose banks to additional money laundering/ terrorist financing risks. Risks of new types of misconduct and of potentially fraudulent activities related to COVID-19 support measures have not abated.
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