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European banks report strong second quarters

The big question remains when governments will return to fiscal consolidation. How will NPLs fare when taxpayer support is withdrawn is also in doubt.


Nearly two months into the third quarter of the year and European banks are finally getting around to announcing second-quarter results. It has been mostly good news.

Wednesday was a big day, with Barclays, Deutsche Bank and Santander each producing better numbers than analysts had (been led to) forecast.

We won’t see this sort of release every quarter
Tushar Morzaria, Barclays

Barclays was boosted by an impairment release of £800 million, driven by the improved macroeconomic variables (MEVs) in its credit risk models and lower unsecured balances. That compares with a £1.6 billion charge taken in the second quarter of 2020. And this turnaround accounts for most of the difference between £2.6 billion of pre-tax profit for the most recent quarter compared with just £400 million one year ago.

“We won’t see this sort of release every quarter,” Tushar Morzaria, Barclays group finance director, told analysts on the earnings call. “But we do expect the quarterly impairment charge to be below historical levels in the coming quarters.”

For Santander, loan loss provisions stood at €1.75 billion for the second quarter of this year, down from €3 billion in the second quarter of 2020, with a cost of credit of 94 basis points at the end of June 2021, down from 126bp at the end of June 2020.


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