Most European banks beat profit estimates for the second quarter, with surprisingly robust loan portfolios providing a major boost to their earnings.
(Bloomberg) — Most European banks beat profit estimates for the second quarter, with surprisingly robust loan portfolios providing a major boost to their earnings.
Societe Generale’s credit provisions for the period were €281 million ($307 million) below the consensus estimate, the firm said Thursday, which lifted net income €122 million above the forecast. Reporting the same day, ING Groep NV set aside €286 million less for souring loans than predicted, contributing roughly two thirds to a massive profit beat.
Similar trends were visible at most other European Union banks, with almost all reporting higher profits and lower credit provisions than analysts had forecast.
Still, many observers expect credit defaults — and hence bank’s loan loss provisions — to ultimately rise as the rapid pace of interest rate hikes undertaken by the European Central Bank feeds through to the real economy. But that effect has yet to materialize as banks across the board said that their loan books are healthy.
Some lenders — most notably Deutsche Bank AG — said that a rising number of single-name defaults had negatively impacted their quarter. The German giant also said that it had seen “softening” loan quality in some sectors such as commercial real estate and Germany’s automotive industry.
While economic and geopolitical challenges persisted in the three months through June, they were “less pronounced than in previous quarters,” ING Chief Executive Officer Steven van Rijswijk said in an earnings statement. “Despite low risk costs and no identifiable trends in provisioning we remain vigilant, as the cost of living and of doing business rises for our customers,” he said.
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