For European lenders, home is no longer such a bad place to be

Bloomberg

For European banks, home is no longer such a bad place to be.
Lenders such as Spain’s BBVA that sought to escape Europe’s negative interest rates by expanding in emerging markets are looking at domestic deals again. France’s BNP Paribas SA is planning to reinvest proceeds from the sale of a US unit in Europe as it builds out its franchise and expands its equities business.
Fixed income traders such as Deutsche Bank AG have been taking market share again while their lending businesses are gathering momentum. Even US powerhouses such as JPMorgan Chase & Co and Citigroup Inc are rediscovering the continent, expanding their private and corporate banks to take on the Europeans on their home turf.
After a decade of struggling to keep up with Wall Street, European banks are enjoying a rare period of outperformance, buttressed by four large interest rate increases in the span of just half a year. Having trimmed costs and raised fees during the lean times, they stand to benefit as surging lending income allows them to boost shareholder payouts, invest in trading units and absorb losses on loans during a recession that’s likely already begun.
“There’s a real tailwind coming from interest rates at this point, which is great for the banks,” Deutsche Bank CFO James von Moltke said. “The negative rate environment has really leached a lot of profitability — and with the profitability, the ability to invest in the future — out of the banking system.”
Lending income at the region’s top banks is on course to reach the highest in over a decade this year and hit a record in 2023, analysts predict.