From a European perspective, the protracted low interest rate environment means new lending and investments are yielding lower income. This has led to profitability pressures. Such cyclical dynamics have also led to a faster transition towards more market-based finance1. The resulting increased substitutability of finance and hence more competitive environment can make it difficult to accumulate capital over the longer term.
The IMF, ECB, and indeed the Central Bank of Ireland have been highlighting many of these aspects as a major concern for some time now 2. From a global perspective, European banks still underperform versus their US counterparts with respect to profitability and forecasted Return on Equity (RoE)3.