ECB believes bank profits won't recover before 2022

Lenders in the euro zone have struggled to make sizeable profits over the last decade following the 2008 global financial crisis, with stronger regulatory scrutiny and low interest rates. However, the recent coronavirus-induced crisis has worsened bottom lines further and that will continue to be felt over the coming months, according to the European Central Bank. Market expectations point to an overall return on equity (ROE) — a measure of banking profitability — of 1.7% in 2020, followed by 3.1% and 5% in 2021 and 2022, respectively. The ROE of euro area banks stood at around 6% in June of 2019, according to ECB data.

The coronavirus pandemic and the subsequent stay-at-home orders have dented economic activity, which has in turn limited the financial system. Consumers and businesses become wary of taking on big expenses in a downturn and investment decisions are put on hold. Three pharmaceutical companies have recently announced their COVID-19 vaccines will be ready for distribution until 2021. However, there is still some uncertainty as to when vaccinations will start, which parts of the population will get it first and, more importantly, when economies will return to normal levels of activity.