Q2 2025 supervisory data indicate improvements in ROE despite continued tightening of net interest margins in EU/EEA banks

The European Banking Authority (EBA) today published its Q2 2025 Risk Dashboard (RDB), which discloses aggregated statistical information for the largest EU/EEA credit institutions.

• The Common Equity Tier 1 ratio for EU/EEA banks stood at 16.3%, showing an increase of 10 basis points from the prior quarter. Bank capital increased at a higher rate than risk-weighted assets, which rose by approximately 2.2% due to growth in credit risk RWAs (Figure 1).
• The liquidity coverage ratio and net stable funding ratio both increased in the second quarter, reaching 161.6% (up from 159.5% in Q1) and 127.2% (compared to 126.9% in Q1), respectively. The large-scale transition from cash to central government assets in the High-Quality Liquid Assets composition has decreased in pace (see Figure 2).
• EU/EEA banks' total assets showed a small increase of EUR 100bn vis-à-vis previous quarter, amounting to EUR 29 trillion. Their cash balances reduced to 10.2% of total assets, while at the same time allocation to other classes and derivatives increased marginally. Their total liabilities stood at EUR 27 trillion, slightly increased compared to last quarter, with little changes in the liability structure.
• Outstanding loans to both households and non-financial corporates remained stable over the quarter, despite the modest decrease of 0.8% QoQ in loans to small and medium-sized enterprises. Sovereign exposures continued to rise, reaching EUR 4 trillion (+9.5% year-to-date and +13.6% year-on-year) (see Figure 3). Banks raised their sovereign exposures to other EU/EEA countries, resulting in a decrease in the proportion of domestic sovereign exposures to 45%, compared to 47% in December 2024
• EU/EEA banks reported non-performing loans totalling EUR 372.6 billion (1.84% of total loans), reflecting a slight decrease from EUR 375.5 billion in the previous quarter. The allocation to IFRS 9 stage 2 declined to 9.4%, with stage 2 loans decreasing by approximately EUR 20 billion. The cost of risk also fell to 48 basis points, down from 57 bps in Q1 2025.
• During the second quarter of 2025, EU/EEA banks recorded a return on equity (RoE) of 10.7%, compared to 10.5% in the first quarter. Notably, only five jurisdictions reported a weighted average RoE below 10%. The return on assets also increased marginally to 0.75%. Net interest margin (NIM) continued to tighten during the period, with banks posting a NIM of 1.58%, down from 1.6% in Q1 2025 and 1.68% in Q2 2024. Consequently, net interest income for declined further, reaching levels last observed in December 2023. Unlike previous quarters, EU/EEA banks were unable to achieve additional growth in revenue from net fees and commissions, which experienced a slight decline compared to the first quarter of the year.

Note to editors

Key indicators have been visualised in a dynamic way. To facilitate the navigation, here is the full list of key indicators that you can find in the graphs:

• Slide 1: Quarter on quarter change in EU/EEA banks' risk weighted assets. [DOWNLOAD DATA]
• Slide 2: Evolution of composition of LCR numerator. [DOWNLOAD DATA]
• Slide 3: Evolution of sovereign exposures of EU/EEA banks by counterparty's country of domicile. [DOWNLOAD DATA]