Coverage: Q1 2025 · Information to 20 May 2025
Originally Published as TGB Premium Intelligence
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TGB Quarterly Regional Banking Monitor · 20 May 2025
Most European central banks kept easing in the first quarter of 2025 and euro area banks carried a 15.86% aggregate CET1 ratio into the year, but trade tensions from April clouded the outlook for credit and margins.
The desk view
Europe's banks came through the first quarter of 2025 with capital intact and earnings still strong, even as policy rates fell. The ECB cut its deposit facility rate three times between January and April, to 2.25%, and the Bank of England, the Swiss National Bank and the Riksbank also eased. Supervisory data show an aggregate CET1 ratio of 15.86% and a non-performing loan ratio of 2.28% for ECB-supervised banks at the end of 2024. The pressure is building elsewhere: banks expect lower rates to squeeze margins, credit standards for firms tightened again, and the ECB judged in April that trade tensions had worsened the growth outlook. Consolidation has also moved up the agenda, with supervisory and competition approvals for UniCredit and BBVA.
The regional picture
Monetary easing continued across most of Europe in the first quarter of 2025. The ECB lowered its three key rates by 25 basis points on 30 January 2025, taking the deposit facility rate to 2.75% from 5 February. It cut by the same amount on 6 March 2025, to 2.50% from 12 March. A third cut on 17 April 2025 took the rate to 2.25% from 23 April. Between the February and April changes the rate fell by a further 50bp.
At its meeting ending 5 February 2025 the Bank of England's Monetary Policy Committee voted 7–2 to reduce Bank Rate to 4.5%, with two members preferring 4.25%. It held at 4.5% by an 8–1 vote at its meeting ending 19 March 2025. At its meeting ending 7 May 2025 it cut to 4.25% by a 5–4 majority, with two members wanting 4% and two wanting no change. The Swiss National Bank lowered its policy rate by 0.25 percentage points to 0.25% with effect from 21 March 2025. The Riksbank cut its policy rate from 2.5% to 2.25% in January 2025, a cumulative 1.75 percentage points since May 2024, and announced on 8 May 2025 that it was holding the rate at 2.25%. Norges Bank kept its policy rate at 4.5% at its meetings on 26 March and 7 May 2025.
Outside the larger economies, policy diverged. The Czech National Bank lowered its two-week repo rate by 0.25 percentage point to 3.50% on 7 May 2025. The Central Bank of the Republic of Türkiye moved the other way on 17 April 2025, raising its one-week repo rate from 42.5% to 46% and its overnight lending rate from 46% to 49%.
The macroeconomic backdrop was soft but not recessionary. Eurostat's flash estimate of 15 May 2025 put euro area GDP growth at 0.3% on the previous quarter in the first quarter of 2025. In March ECB staff projected growth of 0.9% for 2025, and euro area inflation edged down to 2.2% in March 2025.
Policy rates after the last decision on or before 20 May 2025, %
Source: European Central Bank, Monetary policy decisions, 17 April 2025, 17 April 2025; Bank of England, Monetary Policy Summary, May 2025, 8 May 2025; Swiss National Bank, Introductory remarks, news conference, 20 March 2025, 20 March 2025; Sveriges Riksbank, Policy rate unchanged at 2.25 per cent, 8 May 2025; Norges Bank, Rate decision May 2025, 8 May 2025; Czech National Bank, CNB cuts interest rates, 7 May 2025.
Policy decisions, January to May 2025
| Central bank | Decision | Policy rate after decision |
|---|---|---|
| ECB (deposit facility) | Cut 25bp, 30 January 2025 | 2.75% |
| ECB (deposit facility) | Cut 25bp, 6 March 2025 | 2.50% |
| ECB (deposit facility) | Cut 25bp, 17 April 2025 | 2.25% |
| Bank of England | Cut 25bp (7–2), meeting ending 5 February 2025 | 4.5% |
| Bank of England | Hold (8–1), meeting ending 19 March 2025 | 4.5% |
| Bank of England | Cut 25bp (5–4), meeting ending 7 May 2025 | 4.25% |
| Swiss National Bank | Cut 25bp, 20 March 2025 | 0.25% |
| Sveriges Riksbank | Cut 0.25 percentage points, January 2025 | 2.25% |
| Sveriges Riksbank | Hold, 8 May 2025 | 2.25% |
| Norges Bank | Hold, 26 March 2025 | 4.5% |
| Norges Bank | Hold, 7 May 2025 | 4.5% |
| Czech National Bank | Cut 25bp, 7 May 2025 | 3.50% |
| CBRT (Türkiye) | Raise, 17 April 2025 | 46% |
Source: European Central Bank, Combined monetary policy decisions and statement, 30 January 2025, 30 January 2025; European Central Bank, Monetary policy decisions, 6 March 2025, 6 March 2025; European Central Bank, Monetary policy decisions, 17 April 2025, 17 April 2025; Bank of England, Monetary Policy Summary, February 2025, 6 February 2025; Bank of England, Monetary Policy Summary, March 2025, 20 March 2025; Bank of England, Monetary Policy Summary, May 2025, 8 May 2025; Swiss National Bank, Introductory remarks, news conference, 20 March 2025, 20 March 2025; Sveriges Riksbank, Policy rate cut by 0.25 percentage points to 2.25 per cent, 29 January 2025; Sveriges Riksbank, Policy rate unchanged at 2.25 per cent, 8 May 2025; Norges Bank, Rate decision March 2025, 27 March 2025; Norges Bank, Rate decision May 2025, 8 May 2025; Czech National Bank, CNB cuts interest rates, 7 May 2025; Central Bank of the Republic of Türkiye, Press Release on Interest Rates (2025-24), 17 April 2025.
Euro area banking system: strong capital, softer returns
The ECB's supervisory banking statistics for significant institutions show a system with high capital and stable asset quality at the end of 2024. The aggregate CET1 ratio was 15.86% in the fourth quarter of 2024, up from 15.74% in the previous quarter and in line with 15.87% a year earlier. Across countries it ranged from 12.88% in Spain to 22.05% in Latvia. The aggregate non-performing loan ratio, excluding cash balances, was 2.28%, against 2.31% in the third quarter and 2.30% a year earlier.
Profitability eased in the final quarter. The aggregated annualised return on equity fell to 9.54% in the fourth quarter of 2024 from 10.09% in the previous quarter, though it was above the 9.32% of a year earlier. That was a fall of 55bp on the quarter. The ECB said the aggregated net interest margin had reached 1.60% in the fourth quarter of 2023 and remained quite stable since then. Country margins ranged from 0.89% in France to 3.54% in Slovenia in the fourth quarter of 2024.
The forward-looking credit indicators were less benign. The share of loans classified as stage 2, showing a significant increase in credit risk, rose to 9.93% from 9.74% in the previous quarter. The non-performing loan ratio for loans to non-financial corporations was 3.52% in the fourth quarter of 2024, below 3.65% in the previous quarter but above 3.48% a year earlier. For loans to non-financial corporations collateralised by commercial real estate, the ratio rose to 4.60% from 4.56%. Commercial property lending and the stage 2 share were the measures that worsened over the quarter.
Significant institutions supervised by the ECB
| Indicator | Q4 2023 | Q3 2024 | Q4 2024 |
|---|---|---|---|
| CET1 ratio | 15.87% | 15.74% | 15.86% |
| Return on equity (annualised) | 9.32% | 10.09% | 9.54% |
| NPL ratio (excluding cash balances) | 2.30% | 2.31% | 2.28% |
| Stage 2 loans, share of total | 9.73% | 9.74% | 9.93% |
| Loan-to-deposit ratio, households and non-financial corporations | 102.74% | 102.13% | 100.43% |
| NPL ratio, loans to non-financial corporations | 3.48% | 3.65% | 3.52% |
The European Banking Authority's risk dashboard, which covers a wider EU/EEA sample, gives a similar picture. EU/EEA banks reported a return on equity of 10.5% for 2024, and the net interest margin decreased by 1bp to 1.66% in the fourth quarter of 2024, below its peak of 1.69% in March 2024. Net fee and commission income grew 6.1% on the quarter and 9.6% on the year. Non-performing loans fell 1.1% on the quarter to EUR 375bn.
EU/EEA banks: EBA risk dashboard, Q4 2024
| Indicator | Value |
|---|---|
| Return on equity, full year 2024 | 10.5% |
| Return on assets, full year 2024 | 0.73% |
| Net interest margin | 1.66% |
| CET1 ratio, fully loaded | 16.0% |
| Stage 2 loans, share of total loans | 9.7% |
| Cost of risk | 49bp |
| Liquidity coverage ratio | 163.4% |
| Net stable funding ratio | 127.1% |
| Loan-to-deposit ratio, households and non-financial corporations | 104.9% |
Euro area credit: cheaper loans, tighter standards
Lower policy rates were reaching borrowers. The ECB reported that the average interest rate on new loans to firms declined to 4.1% in February 2025 from 4.3% in January 2025. The average rate on new mortgages was 3.3% in February 2025. The annual growth rate of adjusted loans to non-financial corporations rose to 2.3% in March 2025 from 2.1% in February, and that of loans to households to 1.7% from 1.5%.
Banks were nonetheless more cautious about risk. In the April 2025 bank lending survey, conducted between 10 and 25 March 2025 among 155 banks, euro area banks reported a small further net tightening of credit standards for loans to enterprises. Standards for housing loans eased while those for consumer credit tightened slightly. Demand from firms decreased slightly, while demand for housing loans continued to increase strongly. For the second quarter of 2025, banks expected a further net tightening of credit standards across all three loan segments.
The survey also pointed to pressure on earnings. Banks reported a further negative net impact of ECB rate decisions on their net interest margins over the previous six months. They expected a similar negative impact over the next six months, which they said would drag down overall profitability despite a slightly positive contribution from volumes. The ECB warned in April 2025 that the market response to trade tensions was likely to tighten financing conditions.
Euro area credit indicators
| Indicator | Latest reading |
|---|---|
| Average rate on new loans to firms | 4.1% (February 2025) |
| Average rate on new mortgages | 3.3% (February 2025) |
| Growth of adjusted loans to non-financial corporations | 2.3% (March 2025) |
| Growth of adjusted loans to households | 1.7% (March 2025) |
| Net share of banks tightening standards, loans to firms | 3% (Q1 2025) |
| Net share of banks tightening standards, housing loans | -7% (Q1 2025) |
| Net share of banks tightening standards, consumer credit | 3% (Q1 2025) |
Source: European Central Bank, Monetary policy statement, 17 April 2025, 17 April 2025; European Central Bank, Monetary developments in the euro area: March 2025, 29 April 2025; European Central Bank, April 2025 euro area bank lending survey, 15 April 2025.
Euro area banks: first-quarter results
The large euro area banks reported strong first-quarter 2025 results, and five of the seven in the table below lifted net profit on a year earlier. UniCredit reported a return on tangible equity of 22.0% and raised its CET1 ratio by 27bp to 16.1%. Deutsche Bank's profit before tax rose 39% to EUR 2.8bn. BBVA's profit rose 46% in constant euros, and its loan portfolio grew 15% in constant euros. BNP Paribas and ING were the exceptions, with net income down 4.9% and net result down 7.8% respectively. Credit costs stayed contained: UniCredit's cost of risk was 8 basis points, BNP Paribas's 33bp and Santander's 1.14%, down 6 basis points. ING announced a EUR 2.0bn share buyback alongside its results.
Euro area banks: first-quarter 2025 results
| Bank | Net profit | Change on a year earlier | Return measure | CET1 ratio |
|---|---|---|---|---|
| UniCredit | EUR 2.8bn | +8.3% | RoTE 22.0% | 16.1% |
| Santander | EUR 3,402m | +19% | RoTE 15.8% (post-AT1) | 12.9% |
| BBVA | EUR 2.7bn | +23% | RoTE 20.2% | 13.09% |
| BNP Paribas | EUR 2,951m | -4.9% | Not available | 12.4% |
| Intesa Sanpaolo | EUR 2,615m | +13.6% | Not available | 13.3% |
| Deutsche Bank | EUR 2.0bn | +39% | RoTE 11.9% | 13.8% |
| ING | EUR 1,455m | -7.8% | RoE 12.0% | 13.6% |
Source: UniCredit S.p.A., 1Q25 Group results press release, 12 May 2025; Banco Santander, Q1 2025 results press release, 30 April 2025; BBVA, BBVA earns EUR 2.7 billion in first quarter, 29 April 2025; BNP Paribas, First quarter 2025 results press release, 24 April 2025; Intesa Sanpaolo S.p.A., Consolidated results as at 31 March 2025, 6 May 2025; Deutsche Bank AG, Media release: first-quarter 2025 results, 29 April 2025; ING Groep N.V., 1Q2025 results press release, 2 May 2025.
United Kingdom: easing with a split committee
The Bank of England moved more slowly than the ECB. Bank Rate was cut to 4.5% in February 2025 and to 4.25% in May 2025, and the 5–4 vote in May showed a committee divided in both directions. UK CPI inflation fell to 2.6% in March 2025 from 2.8% in February, but the Bank expected it to rise to 3.5% for 2025 Q3 as earlier energy price increases fed through. The Committee said uncertainty around global trade policies had intensified since the United States imposed tariffs.
The Financial Policy Committee's April 2025 record judged that the global risk environment had deteriorated, that severe shocks were more likely and that the growth outlook had weakened. It kept the UK countercyclical capital buffer rate at 2% and judged the banking sector well capitalised. Major UK banks reported underlying returns on tangible equity of 13.4% for 2024, with net interest margins around their long-run average. The FPC found that banks were not restricting lending to protect their capital positions. It noted risks for highly leveraged corporate borrowers relying on market-based finance.
First-quarter results were solid. HSBC's profit before tax fell by $3.2bn to $9.5bn on a year earlier, but its annualised return on tangible equity was 17.9%, or 18.4% excluding notable items, and its CET1 ratio was 14.7%. HSBC's net interest margin was 1.59%, up 5bp on the fourth quarter as funding costs fell faster than asset yields. Its expected credit losses rose by $0.2bn to $0.9bn as it raised allowances for heightened uncertainty, geopolitical tensions and higher trade tariffs. Barclays reported profit before tax of £2,719m, against £2,277m a year earlier, with a return on tangible equity of 14.0% and a CET1 ratio of 13.9%. Its credit impairment charges rose to £0.6bn, a loan loss rate of 61bps.
UK and Swiss banks: first-quarter 2025 results
| Bank | Profit | Return measure | CET1 ratio |
|---|---|---|---|
| HSBC | Profit before tax $9.5bn | RoTE 17.9% (annualised) | 14.7% |
| Barclays | Profit before tax £2,719m | RoTE 14.0% | 13.9% |
| UBS | Net profit $1.7bn | Return on CET1 capital 9.6% | 14.3% |
Source: HSBC Holdings plc, 1Q 2025 Earnings Release, 29 April 2025; Barclays PLC, Q1 2025 Results Announcement, 30 April 2025; UBS Group AG, UBS's first-quarter 2025 results, 30 April 2025.
Switzerland and the Nordic countries
The Swiss National Bank cut its policy rate to 0.25% from 21 March 2025, citing low inflationary pressure and heightened downside risks to inflation. Swiss inflation had fallen to 0.3% in February 2025 from 0.7% in November 2024, and the SNB forecast 0.4% for 2025. UBS reported first-quarter 2025 net profit of $1.7bn, a CET1 capital ratio of 14.3% and a return on CET1 capital of 9.6%, or 11.3% on an underlying basis.
In Sweden, the Riksbank's January 2025 cut took its policy rate to 2.25%. When it held on 8 May 2025, it said inflation was somewhat more likely to undershoot than overshoot its March forecast, which could suggest a slight easing of policy. Norges Bank held at 4.5% on 26 March 2025, when its forecast was consistent with a policy rate of 4% by the end of 2025, and it held again on 7 May 2025.
Central and eastern Europe and Türkiye
The Czech National Bank cut its two-week repo rate by 0.25 percentage point to 3.50% on 7 May 2025. Türkiye tightened instead: on 17 April 2025 the CBRT raised its one-week repo rate to 46% from 42.5%. That was an increase of 350bp. A higher policy rate raises the cost of central bank funding for Turkish banks.
Regulation and consolidation
The EU's new banking package has applied since 1 January 2025. The European Commission postponed the application of the market risk rules under the fundamental review of the trading book by one year, to 1 January 2026. The first effects are visible in bank capital ratios. BNP Paribas said its CET1 ratio of 12.4% at 31 March 2025 was stable compared with 1 January 2025 after absorbing the full impact of Basel 4 excluding FRTB, a reduction of 50 basis points. Intesa Sanpaolo's CET1 ratio rose around 45 basis points in the quarter to 13.3%, including a negative Basel 4 impact of around 40 basis points.
The United Kingdom has moved more slowly. On 17 January 2025 the Prudential Regulation Authority, in consultation with HM Treasury, delayed UK implementation of Basel 3.1 by one year to 1 January 2027, to allow more clarity on plans in the United States. Transitional periods will be shortened so that full implementation remains 1 January 2030.
Supervisors also launched stress tests. The EBA launched its 2025 EU-wide stress test on 20 January 2025, covering 64 banks and 75% of banking assets in the EU and Norway. The Bank of England launched its 2025 Bank Capital Stress Test on 24 March 2025, with results due in 2025 Q4.
Cross-border and domestic consolidation advanced. UniCredit reported that the ECB had authorised it to raise its Commerzbank stake to 29.9%, in a press release published on 14 March 2025. It also received ECB and Bank of Italy permission to acquire control of Banco BPM, and the German Federal Cartel Office authorised it to increase its direct stake in Commerzbank. In Spain, the CNMC authorised BBVA's takeover bid for Banco Sabadell with commitments on 30 April 2025. The competition authority had identified 96 municipalities where the combined share would exceed 50% with an addition above 15%, and a duopoly in 48 of them. Its authorisation is not final: the Minister of Economy will decide whether to refer the deal to the Council of Ministers.
Cross-country comparison
Europe banking monitor: policy rates and bank indicators
| Economy | Policy rate (latest decision to 20 May 2025) | Bank indicator |
|---|---|---|
| Euro area | 2.25% (ECB deposit facility) | CET1 15.86%, RoE 9.54% (Q4 2024) |
| United Kingdom | 4.25% | Underlying RoTE of major banks 13.4% (2024); CCyB 2% |
| Switzerland | 0.25% | UBS CET1 14.3% (Q1 2025) |
| Sweden | 2.25% | Not available |
| Norway | 4.5% (7 May 2025) | Not available |
| Czech Republic | 3.50% | Not available |
| Türkiye | 46% | Not available |
Source: European Central Bank, Monetary policy decisions, 17 April 2025, 17 April 2025; ECB Banking Supervision, Supervisory banking statistics on significant institutions for the fourth quarter of 2024, 20 March 2025; Bank of England, Monetary Policy Summary, May 2025, 8 May 2025; Bank of England, Financial Policy Committee Record, April 2025, 9 April 2025; Swiss National Bank, Introductory remarks, news conference, 20 March 2025, 20 March 2025; UBS Group AG, UBS's first-quarter 2025 results, 30 April 2025; Sveriges Riksbank, Policy rate unchanged at 2.25 per cent, 8 May 2025; Norges Bank, Rate decision May 2025, 8 May 2025; Czech National Bank, CNB cuts interest rates, 7 May 2025; Central Bank of the Republic of Türkiye, Press Release on Interest Rates (2025-24), 17 April 2025.
The comparison shows how far apart policy rates sit, from 0.25% in Switzerland to 46% in Türkiye.
Outlook risks
The main risk is a weaker economy feeding into credit quality. The ECB judged in April 2025 that the growth outlook had deteriorated owing to rising trade tensions, and the FPC that severe shocks had become more likely. The second risk is margins: banks surveyed by the ECB expect rate decisions to drag down profitability, and the EU/EEA net interest margin in the EBA's data has already slipped from its March 2024 peak. The third is execution of the consolidation wave, where the BBVA bid still awaits a government decision. Against these, capital and liquidity buffers are high, with a fully loaded CET1 ratio of 16.0% and a liquidity coverage ratio of 163.4% for EU/EEA banks.
What to watch
- 2025 Q3: the Bank of England expects UK CPI inflation to rise to 3.5%.
- Second quarter of 2025: euro area banks expect a further net tightening of credit standards across all three loan segments.
- 2025 Q4: the Bank of England publishes the results of its 2025 Bank Capital Stress Test.
- 1 January 2026: the EU's FRTB market risk rules are due to apply, after the one-year postponement.
- 1 January 2027: the new start date for Basel 3.1 in the United Kingdom.
Primary sources: European Central Bank, April 2025 euro area bank lending survey, 15 April 2025; European Central Bank, Combined monetary policy decisions and statement, 30 January 2025, 30 January 2025; European Central Bank, Monetary policy decisions, 6 March 2025, 6 March 2025; ECB Banking Supervision, Supervisory banking statistics on significant institutions for the fourth quarter of 2024, 20 March 2025; European Central Bank, Monetary policy decisions, 17 April 2025, 17 April 2025; UniCredit S.p.A., 1Q25 Group results press release, 12 May 2025; Bank of England, Monetary Policy Summary, February 2025, 6 February 2025; Swiss National Bank, Introductory remarks, news conference, 20 March 2025, 20 March 2025; Sveriges Riksbank, Policy rate cut by 0.25 percentage points to 2.25 per cent, 29 January 2025; Comisión Nacional de los Mercados y la Competencia, CNMC approves the BBVA/Sabadell second phase merger with commitments, 30 April 2025; Bank of England, Monetary Policy Summary, May 2025, 8 May 2025; Bank of England, Monetary Policy Summary, March 2025, 20 March 2025; Sveriges Riksbank, Policy rate unchanged at 2.25 per cent, 8 May 2025; Norges Bank, Rate decision March 2025, 27 March 2025; Norges Bank, Rate decision May 2025, 8 May 2025; Czech National Bank, CNB cuts interest rates, 7 May 2025; Central Bank of the Republic of Türkiye, Press Release on Interest Rates (2025-24), 17 April 2025; Eurostat, GDP and employment flash estimates for the first quarter of 2025, 15 May 2025; European Central Bank, Monetary policy statement, 6 March 2025, 6 March 2025; European Central Bank, Monetary policy statement, 17 April 2025, 17 April 2025; European Banking Authority, EU/EEA banking sector remains stable amidst evolving geopolitical challenges (Risk Dashboard Q4 2024), 21 March 2025; European Central Bank, Monetary developments in the euro area: March 2025, 29 April 2025; Banco Santander, Q1 2025 results press release, 30 April 2025; BBVA, BBVA earns EUR 2.7 billion in first quarter, 29 April 2025; Intesa Sanpaolo S.p.A., Consolidated results as at 31 March 2025, 6 May 2025; Deutsche Bank AG, Media release: first-quarter 2025 results, 29 April 2025; BNP Paribas, First quarter 2025 results press release, 24 April 2025; ING Groep N.V., 1Q2025 results press release, 2 May 2025; Bank of England, Financial Policy Committee Record, April 2025, 9 April 2025; HSBC Holdings plc, 1Q 2025 Earnings Release, 29 April 2025; Barclays PLC, Q1 2025 Results Announcement, 30 April 2025; UBS Group AG, UBS's first-quarter 2025 results, 30 April 2025; European Banking Authority, The EBA launches its 2025 EU-wide stress test, 20 January 2025; European Commission, Banking package: questions and answers on postponing the FRTB, 24 July 2024; Bank of England (PRA), The PRA announces a delay to the implementation of Basel 3.1, 17 January 2025.