Financial reporting of European banks: benchmark study H1 2023

Has the European banking sector achieved renewed stability amidst a troubled macroeconomic context? Over the past three years, the banking sector has had to endure numerous crises, including Covid-19 and the war in Ukraine. What do the 2023 interim results of the 26 largest banks in Europe indicate about the impact on Expected Credit Losses (ECL) in this unusual environment?

We have analysed the 2023 interim reports of 26 banks in 11 European countries to better understand the impact of financial turbulence and ongoing geopolitical crises on their Expected Credit Losses. This study is the seventh in its series and follows on from previous editions of the report since its launch in 2020.

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A focus on Expected Credit Losses

The study mainly focuses on the ECL-related impacts, with key findings on:

ECL charge impact of H1 2023 on the profit or loss and ECL allowances
ECL allowances: changes in coverage ratios and allocation between stages
Post-model adjustments/overlays
Forward looking information

In the following, our Senior Manager Heike Hartenberger provides a contextualisation of the report for the German market:

„Not only European banks continue to find themselves in a turbulent macroeconomic environment. As our study also shows, the Expected Credit Loss (ECL) model of IFRS 9 continues to prove its worth in these times. The generation of macroeconomic scenarios and forward-looking information continues to pose challenges. The ECL model does not specify a particular method. It gives banks the scope necessary to take uncertainties into account, to generate and weight different scenarios. The study shows heterogeneity not only in the individual scenarios and their weighting but also in the reporting on their use in the ECL model.“