The profitability of euro area banks is unlikely to recover to pre-pandemic levels before 2022, the European Central Bank (ECB) said in its latest Financial Stability Review report published on Wednesday.
According to the report, the profitability of euro area banks weakened in the first half of 2020 amid pandemic-led economic fallout, and third quarter earnings posted by listed banks suggest that the profitability declined further to below 1 percent.
The recent resurgence in infections and new containment measures may lead to a downward revision of bank profitability forecasts in the coming years, the ECB added.
The semi-annual review pointed out that current extensive policy support is helping euro area firms and households amid the economic fallout, but risks can arise either from a premature end to measures or from the delayed withdrawal of support.
Dispersed economic and financial market impact on countries and sectors could lead to concentration of risks in some areas, it also said.