December 2022 European Banking: Credit Portfolio Update

Economic outlook in 2023 is widely considered to be very challenging with multi-quarter recessions being predicted across most markets.

December 14, 2022
  • Gang Hu
  • Tom Mundy

Our December 2022 European Banking: Credit Portfolio Update report reflects on the deteriorating macroeconomic environment and how this is beginning to impact European credit markets. Whilst the recent EBA data highlights a continual improvement in asset quality evidenced in the NPL ratio falling by a further 20bps to 1.8% over the six month period to 30 June 2022, the Stage 2 underperforming loans increased by 60bps over a similar period to 9.5% - a new, unwanted, record high for the EU banking sector. It is particularly significant that this asset quality deterioration was evident before both markets and sentiment turned increasingly negative in Q3 amid the growing threat of recession.

In the report we also focus on a number of key themes including the challenges many real estate corporates face with bond markets, an updated analysis of loans subject to expired moratoria – circa €616bn in Q 2022, the rising insolvencies in the UK as well as recent changes to the Turkish NPL market.

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