(Bloomberg) – European banks have used the pandemic to start tackling long-standing issues weighing on their profitability relative to their U.S. rivals, according to their main regulator.
“There has been a long period in which European banks seemed to wait for the Godot of interest rates raising and replenishing their margins,” said Andrea Enria, who chairs the supervisory board of the European Central Bank, in an interview with Bloomberg TV’s Maria Tadeo. “With the pandemic, they realized they had to act.”
Enria said the lagging profitability of European banks is rooted in “structural weaknesses” such as cost inefficiency, business models that lack focus and insufficient investment in digital technology. Nonetheless, Enria welcomes the fact that European banks have beaten profit estimates for six consecutive quarters and are generating profits at pre-pandemic levels two years ahead of their own expectations.
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