Thread by @jeuasommenulle

Even if the @EBA_News headlines tries its best, it’s hard to find bad news in their latest risk dashboard on European banks: capital is up, NPLs are down, profitability jumped sharply…

@EBA_News When you think about it, it’s crazy how the Covid fears were exaggerated (more on why below.) I mean, look at this: even the most affected sector only saw a very modest rise in NPLs. A 25% scenario would not have been absurd! We're barely at 9% vs 8% in Q1 2020.

@EBA_News Payment holidays on loans are in freefall, with meaningful # only remaining in Spain, Italy or Portugal.

@EBA_News And what’s happening to expired ones? Can borrowers repay?

Well, there are NPLs, of course, but tbh the amounts are very modest and way lower than expectations from a year ago.

@EBA_News So can we find bad news?

Yes, I’d mention two important ones.

@EBA_News First, losses are starting to bite in the public sector.

Those guaranteed loans will cost a lot of money.

It’s a jeuasommenulle after all (=zero sum game)!

While banks’ NPLs are going down, the government ones are going up – sharply !

@EBA_News And the second bit of bad news, courtesy our good friend the ECB: look at the net interest margin ! It’s in freefall!

This can’t last forever, even with all the creativity of the ECB (tiering, TLTROs, etc.)

@EBA_News But of course, all this is very important but the absolute worst thing is that…

For the first time, UK data is gone ☹ #Brexit

I’m probably the only one in the world who cares, but I do care !