Financial reporting of European banks in the context of Covid-19: June 2021 update

We have analysed the 2021 interim reports of 26 banks in 11 European countries to better understand the impact of Covid-19 on their financial performance in H1 2021. This study is the third in its series and follows on our second edition of the report released in May 2021.

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Key findings

• In the first half of 2021, all banks in the sample present a significant decrease in their ECL charge compared to the same period in 2020.
• Most of the banks that experienced the highest increase in ECL charges last year are now among those with a net ECL profit in the first half of 2021.
• 100% out of 18 banks that disclosed their amounts both in H1 2021 and YE 2020 have a cumulated overlay that is an ECL charge.
• The change in overlays represents on average 54% in ECL profit or loss before overlays in absolute value.

The evolution of reduced provisions for expected credit losses in the first half of 2021 demonstrates that the banking sector is clearly more optimistic in regard to its global economic outlook for the future. Throughout the EU, the Irish Banks remain among the most prudent banks in their coverage of exposures for expected credit losses. In addition, the significant level of overlays applied by banks still shows that models used for the estimation of expected credit losses may not currently align to the current economic context and that the estimation process is particularly complex and remains difficult to predict.

Michael Tuohy Partner, Audit & Assurance

Read the report below to find out more.