SHOCK WARNING: EU banking crisis to continue for YEARS

Banks across the continent have limited ways to become more profitable, according to in-depth analysis by business consultants Ernst and Young.

The financial institutions will struggle as any “noticeable” increase in interest rates with the eurozone is unlikely and the balance sheets of the southern European banks will continue to be burdened by toxic loans.

The consultants predicted European banks would close branches, cut jobs and increase fees for customers in a drive for profits.

US banks are in a much healthier state, according to the analysis, benefitting from higher interest rates and strong capital markets on the other side of the Atlantic, meaning profit margins are higher compared to banks within the European Union (EU).

Comparing equity ratios – which shows how a bank’s equity is priced over a particular period – the ten largest US banks significantly outperformed the 10 largest banks in the EU in terms of profitability in the first half of 2017.

For the US banks, the rate climbed from 8.8 to 10.6 per cent, with the European banks from 5.6 to 5.9 percent.

The profits of the top 10 European banks rose by 5 per cent to £21.1 billion (€24 bn) between January and July, while the US banks increased by 19 percent to a total of £50.1bn (€57bn).

And the equity ratio of the 10 banks in Europe rose slightly from 5.4 to 5.7 per cent, in the USA it decreased from 7.6 to 7.5 per cent.

Ernst and Young said in a statement: ”The gap between the US banks and their European competitors in terms of profitability has once again significantly increased in the first half of the year.

“Despite the slight profit plus this year, the profit situation of European major banks is anything but satisfactory.”

The consultants analysed the 10 largest banks in the EU, according to their balance sheet total, with the British HSBC, French BNP Paribas and Deutsche Bank ranked first.

In the US, the largest bank is FannieMae, followed by JP Morgan Chase and Bank of America.