Surviving a difficult decade negative interest rates which reduced their profitability. European banks now they are counting on higher profits thanks to a concerted increase in borrowing costs. Last week ECB carried out the first rate hike since September 2011, aggressively raising borrowing costs by 50 basis points. This was preceded by apparently more aggressive interest rate hikes by the US Federal Reserve and the Bank of England as central banks around the world struggle to contain skyrocketing inflation that is expected to hit double digits in many areas soon.

Of course, there are different opinions about how European banks will behave now that interest rates are rising after a decade of stagnation. Many are skeptical whether the banks will reap the benefits and lock in the flurry of profits as they hope. And this is because they are threatened, on the one hand, by the risk of a recession, and, on the other hand, by the possibility that governments will impose new taxes on them. However, many banks do not take into account the jump in their profits. Along with them are many industry analysts.

Speaking to the Financial Times, Magdalena Stoklosa, an analyst at Morgan Stanley, called the interest rate hike “a game changer” and “the biggest structural catalyst for European banks.” She and other analysts don’t take into account the fact that banks with larger balance sheets and loan portfolios will benefit the most.

According to Bank of America, during the year only EU banks they will show additional income of 17 billion euros every quarter.

For example, HSBC has a $700 billion global deposit surplus and has calculated that a one percentage point increase in interest rates will net it $5 billion a year from the difference between the lending rate and the deposit rate alone. This amount is equivalent to 1/10 of his income last year, which reached $50 billion.

Similarly, Lloyds Bank estimates it will add £675m to its revenues in its first year, equivalent to $825m. As noted by the British newspaper, it is expected that the rise in interest rates and subsequent changes in the markets will benefit large investment banks. Barclays, BNP Paribas and Deutsche Bank have already raised billions of dollars from their investment arm as their client activity grows.

According to Bank of America, during the year only EU banks they will show additional income of 17 billion euros every quarter from the difference between the lending rate and the deposit rate.

However, according to the British newspaper, the cost of living has risen sharply, leaving consumers and businesses, especially small ones, struggling to cope with inflation. So the question is how much of this interest rate hike income will be lost to non-performing loans.