Cost-to-income ratio of the banking industry in the EU Q1 2024, by country

European banks are showing varied levels of operational efficiency, with Greece leading the pack in 2024. The cost-to-income ratio (CIR), a key indicator of bank profitability, reveals significant disparities across EU countries. Greece's banking sector boasts the lowest CIR at 32.1 percent, followed closely by Portugal and Cyprus, indicating their superior operational efficiency. In contrast, Liechtenstein, France, and Germany face challenges with higher CIRs, suggesting room for improvement in their banking operations.

Recent trends in EU banking sector

The European Union's banking industry has experienced notable fluctuations in recent years, which was reflected in the EU's aggregate cost-to-income ratio. In the first quarter of 2020, the COVID-19 pandemic caused the CIR to spike to 73.29 percent, the highest in recent history. However, the sector has since rebounded, with the CIR stabilizing around 53 percent throughout 2023. This improvement coincides with a significant increase in total operating income, which reached 759.45 billion euros in 2023, up from a low of 561.27 billion euros in 2020.

Profitability and growth outlook

Despite challenges, the EU banking sector has shown resilience and growth. The operating income growth rate reached approximately 16 percent in 2023, the highest in the observed period. This positive trend is particularly noteworthy following the substantial drop in income growth during the 2020 pandemic-induced economic contraction. As banks continue to adapt to changing economic conditions, their ability to maintain low CIRs while increasing operating income will be crucial for sustained profitability and stability in the European financial landscape.