Europe’s banks lag behind American competition even after profit growth

Dhe leading banks in the US collectively earned almost twice as much as their European peers last year, despite falling profits. “The big US banks still leave their European competitors well behind in terms of profits and profitability – even if the gap has narrowed in the past year,” said EY partner Robert Melnyk, summarizing the results of an analysis by the consulting firm.

According to this, the net profit of the ten largest US banks in terms of total assets fell by around 24 percent in 2022 to the equivalent of 140 billion euros. The main reason: Investment banking – i.e. business with IPOstakeovers and mergers – weakened.

For Europe In contrast, EY calculated a plus of 3.5 percent to a good 72 billion euros in the top ten financial institutions, which include Deutsche Bank as the only German institution. This is the highest value in the past ten years. Among other things, the turnaround in interest rates in the euro area is providing a boost. According to EY expectations, interest income should also increase in the current year, and the lending business will become more profitable.

JPMorgan Chase lonely top

Nevertheless, according to the EY overview, in every year since 2013 the cumulative profits of the major American top banks have been at least 83 percent higher than those of their European competitors. Last year, seven of the ten US banks surveyed made a profit of more than ten billion euros, a lonely peak: JPMorgan Chase with a profit of around 35.3 billion euros. Of the ten European banks, only the British HSBC and the French BNP Paribas achieved more than 10 billion euros in profits.

EY partner Melnyk advises not to overestimate the catching up of European banks in terms of profitability: “The weak profit development of US banks is only a snapshot.” If the climate on the capital markets improves and, for example, business with company takeovers and IPOs is back in Once momentum picks up, “we will in all likelihood see significantly increasing profits on the other side of the Atlantic,” predicted Melnyk. “Then the distance to the European institutes could widen again.”

The figures compiled by EY relate to the months of January up to and including December 2022, regardless of when the financial year begins for the respective companies. Sources are, among other things, the financial reports of the banks. The respective average exchange rate for the months of January to December in the years 2013 to 2022 was used to convert the reporting currencies into euros.