As a result, analyst forecasts of bank profitability for 2020 have undergone large downward revisions in recent months, mainly driven by expectations that banks need to increase their provisions for future credit losses.
In fact, banks’ first quarter results already show a considerable negative impact from the crisis in the form of a sharp deterioration in profitability, driven by large increases in loan loss provisions in both the euro area and the United States. Looking beyond cyclical challenges, euro area banks’ profitability prospects are further hindered by ongoing structural problems.