European banks now believe that the Old World is not such a bad place for their activities. Financial institutions such as Spain’s BBVA, which has sought to avoid negative interest rates in Europe by expanding its presence in emerging markets, are now eyeing intra-European markets. their movements. And France’s BNP Paribas plans to reinvest proceeds from the sale of its US unit in Europe as it develops its franchise network and expands its equity business. And fixed-income banking groups such as Germany’s Deutsche Bank have regained market share as their lending business picks up. Even the largest US banks, such as JPMorgan Chase & Co. and Citigroup are reinventing the European continent by expanding their services to individuals and businesses and confronting their competitors on their basis.

After a decade of trying to keep up with the American giants on Wall Street, European banks are enjoying a rare period of outperforming results, helped by four consecutive major rate hikes by the European Central Bank. In fact, all these movements were processed in just six months. By cutting spending and increasing fees over the period, they will benefit as higher borrowing income will allow them to increase shareholder dividends, invest in trading divisions, and cover credit losses during a downturn that is likely already underway. “At the moment, interest rates are creating a very pleasant headwind, which is good for banks,” Deutsche Bank CFO James von Moltke told a conference in November. “The negative interest rate environment has indeed robbed the banking system of significant profits, and with it the opportunity to invest in the future.” Income, in particular, from lending to the leading EU banks this year will reach the highest level in the last decade or more. And in 2023, it is expected to set a record, according to analysts who participated in the corresponding Bloomberg survey.

This event is a sharp reversal after eight years of negative interest rates that have reduced interest income and caused a shock in the banking sector. “We are optimistic about the outlook for European banks in 2023, despite the economy heading into recession,” analysts including Goldman Sachs Group’s Chris Hallam wrote in a recent note. “It may seem paradoxical. However, in many ways, the underlying dynamics of the industry are starkly different from those of previous recessions.”