Eurozone banks reduced their uncollectible receivables by strengthening their capital buffers in the last quarter of last year.
The European Central Bank (ECB) announced statistics on the capital, return on equity and non-performing loans of the banks under supervision for the last quarter of 2022.
Accordingly, the Core Capital Adequacy Ratio (Tier 1), which is the basic measure of the financial strength of banks in the Euro Area, increased from 14.74 percent to 15.27 percent in the last quarter of last year, exceeding the regulatory capital ratio. The said ratio was 12.6 percent on average for banks in Spain, while it was 22.86 percent for banks in Estonia.
Return on equity increased to 7.68%
The return on equity of the largest banks controlled by the ECB in the Euro Zone increased from 7.55 percent to 7.68 percent as high interest rates increased the credit margins of the banks. This rate has been recorded as the highest level since 2015, when such statistics began to be kept. In the last quarter of 2021, this rate was 6.70 percent.
The ratio of non-performing loans in Eurozone banks fell to an all-time low of 2.28 percent (339 billion euros) in the last quarter of 2022.
It was stated that while the ECB has increased interest rates by a record 350 basis points since July 2022 in the face of high inflation, this situation has caused concerns that there may be difficulties in loan repayments.