The EBA has issued an update to its regular 'dashboard' on risk in the EU banking sector. It showed a Common Equity Tier 1 (CET1) ratio of 12.1%, which represents "an increase of 50 basis points compared to 2013", the EBA said in a statement.
The risk dashboard is part of the regular risk assessment conducted by the EBA. It summarises the main risks and vulnerabilities in the banking sector in the EU by looking at the evolution of key risk indicators among a sample of banks across the EU.
Total balance sheet and loan volumes were, in general, back to modest growth in 2014, the EBA said.
The quality of banks' loan portfolios remained "weak but bottoming out", the authority said, while "compared to year end 2013, the impairment ratio of loans slightly decreased by 20 basis points to 6.6%".
Profitability improved slightly year-on-year, but return on equity remained "subdued and materially below banks' average cost of equity", the EBA said. .
Average return on equity increased from zero in 2011 to 3.6% per year by year-end 2014, the statement said.
The cost-to-income ratio of 63.6% in the fourth quarter of 2014 was the highest since 2009, when it reached 55.2%. This has mainly been driven by growing costs, the EBA said.
Deposits increased more than loans in 2014, which led to the EU average loan-to-deposit ratio falling to 108.6% in the fourth quarter; the lowest ratio since 2009, it said.
"There were material differences in deposit volume trends and loan-to-deposit ratios between countries, ranging from about 50% to more than 170%," the EBA said.