In the first quarter, Europe’s top 40 banks set aside 22 billion euros in provisions against loans going sour in the wake of COVID-19. As the second-quarter earnings season kicks off, focus is again on provisioning.
British banks set aside more in the first quarter than any other European country. Four of them — Barclays, Standard Chartered, Lloyds and newly rebranded NatWest Group — will disclose more in the coming days.
Following the U.S. pattern, European investment banks should be cushioned by bumper earnings for their trading arms; Deutsche Bank has already signalled better-than-expected profits.
There are fewer bright spots for retail and corporate-focused names. Spain’s Santander and BBVA, with large Latin American arms, also face the double whammy of loan loss provisions and exchange rate impact.