"Asset quality has further improved, but there are concerns for loans that have benefited from moratoria and public guarantee schemes not least due to general uncertainty due to Covid-19 variant, Omicron," the European Banking Authority said in its latest quarterly "risk dashboard".
"Profitability has stabilised at levels above those seen before the pandemic. The majority of banks expect a rise in operational risks mainly due to elevated cyber risks."
The non-performing loan (NPL) ratio of loans that turn sour, fell 20 basis points quarter-on-quarter to 2.1%, while return on equity, a key measure of profitability, was 7.7%, up from 2.5% in the same quarter in 2020, and 5.7% in the third quarter of 2019.
The core ratio of capital to risk-weighted assets in the third quarter of last year was 15.4%, down 10 basis points on the prior quarter but still well above regulatory requirements, EBA said.
The EBA findings are based on a sample of 131 banks covering more than 80% of the EU's banking sector assets.
(Reporting by Huw Jones; Editing by Tomasz Janowski)
