The energy shock is clouding EU banks’ asset quality outlook, says report
Weaker macroeconomic conditions will moderately increase credit costs for European banks in 2026, S&P Global Ratings said in a report published today.
The report, “European Banks: Energy Shock Clouds The Asset Quality Outlook,” notes that the increase will prove a manageable drag on profitability for many rated banks, not least as revenues should remain resilient and balance sheets are generally healthy.
“Downside risks have increased and a prolonged energy shock could harm banks’ asset quality, notably in vulnerable corporate sectors–autos, airlines, shipping, chemicals, and agriculture,” said S&P Global Ratings analyst Nicolas Charnay. “Higher yields could also decrease credit demand and asset quality in rate-sensitive sectors, such as commercial real estate.”
In a downside scenario also affecting the labour market, household affordability pressures could start to be felt in banks’ consumer lending books and in the non-food retail and consumer goods sectors.