The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Doubts grow over banks’ optimistic forecasts for credit losses

Banks are guiding to lower cost of risk in 2021, but government support and forbearance make the true state of their loan books hard to discern.

Peter Lee banking 1920px.jpg

At the start of February, Europe’s largest banks began to report their full-year 2020 results. With the half-way point of the first quarter of 2021 already looming, investors wanted to hear more about the outlook, particularly for credit costs.

Here is the good news: the executive summary from bank CEOs is that the worst is past. And the tantalizing possibility is that write-backs from conservative provisions taken in the first half of 2020 could nudge up reported profits in 2021.

José Antonio Alvarez, chief executive of Santander, says: “We expect this year the cost of risk to go down from the 128 basis points we had [in 2020] and start the convergence to 1%.”

That would be a return to pre-pandemic levels.

At BNP Paribas, cost of risk in 2020 rose to €5.7 billion, an increase of €2.5 billion from 2019. Compared with Santander, that €5.7 billion is a more modest 66bp of the loan book, with 16bp of that counting against still performing stage 1 or 2 loans.

The NPL peak may have been flattened and the worst may have passed. But don’t take anybody’s word for it

The French bank guides that cost of risk has passed the worst point.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree