Europe’s banks continue to run away from US competition

On Wall Street, the profits are bubbling. Europe’s banks are lagging behind. But not only dealing with the consequences of the financial crisis makes the difference.

Frankfurt / Main (dpa) – Europe’s leading banks fall back in competition with the US competition back and forth. Although Europe’s major bankswere ableto increase their profits in the first half of the year compared to the same period of the previous year.

However , the surpluses on the other side of the Atlantic rose significantly more sharply, according to a report published on Tuesday by the consulting firm EY.

Accordingly, the ten largest banks in Europe by total assets in the first six months of 2018 earned a bottom line of 26.3 billion euros, or 9 percent more than a year ago. The ten largest US banks came to the equivalent of around 69.1 billion euros – a plus of 19 percent. Even clearer is the gap in pre-tax profit: Once again increased 87.5 billion euros ( US ) are standing stagnant 40.6 billion euros ( Europe ).

EY experts ‘down-to-earth record: “Since 2012, American banks’ profits have been at least twice as high as those of their European rivals at the end of a first calendar semester.” And the distance seems to increase.

In the current year, the US banks benefited from the boom in the domestic economy and the tax reform of the Trump government. In Europe , ten years after the recent financial crisis, the legacy remains unresolved. “Overall, the profit situation of European banks is still far from pre-crisis levels and still unsatisfactory,” notes EY banking expert Dirk Müller-Tronnier . “Depreciation and restructuring and legal costs continue to weigh on balance sheets.”

The US government had compulsorily ordered state money to the banks after the crisis in 2007/2008 – and thus ensured in the opinion of many experts that the local financial sector recovered much faster. To make matters worse in Europe , that the market is very rugged and very many banks compete for customers. In addition, historically low interest rates in the euro area are depressing returns. While the US Federal Reserve has raised interest rates long ago, the European Central Bank (ECB) has promised to raise interest rates at the earliest for autumn 2019.

No wonder, then, that the US heavyweights are far more valuable on the stock market: While the market capitalization of the ten largest US banks rose to just over € 1.3 trillion by the cut-off date of 3 August 2018, the market value of the ten largest European institutions fell since the beginning even on together 561 billion euros.