The EBA's risk dashboard looks at the vulnerabilities in the banking sector.
The banks' ratio of common equity tier 1 (CET1) increased by 50 basis points (bps) in the third quarter of 2016, to 14.1%, the EBA said. CET1 capital ratio is a measurement of a bank's core equity capital or CET1 divided by its total risk-weighted assets (RWAs), and is a measure of a bank's financial strength.
The improvement in capital ratios is explained by growth in capital and a reduction in RWAs, the EBA said.
The ratio of NPLs fell a further 10 bps to 5.4%, although the variation between countries remains wide, ranging from 1% to almost 50%, the EBA said. The ratio was highest for smaller banks, at 23.7%, than for medium banks at 11.9% and large banks at 4%.
"Subdued profitability" remains a concern, the EBA said.
"The annualised return on equity (RoE) [in the quarter] decreased to 5.4%, one percentage point below the third quarter last year," it said.
The RoE also decreased when compared to the second quarter, when it was 5.7%, "showing its typical seasonality", the EBA said.
Variation among countries remains wide in profitability too, ranging from around 10% to 19%, it said.
Banks' loan-to-deposit ratio "kept its downward trend", the EBA said, decreasing to 120.1%, compared to 120.5% in the former quarter. With the exception of large institutions the ratio has declined in all banks sizes’ classes, to 134.6% for mid‐sized and 80.9% for small banks.
The figures covered in the dashboard are based on a sample of 156 banks, covering more than 80% of the EU banking sector by total assets, the EBA said.