ECB puts the non-performing loan ratio at 1.99%

According to the European Central Bank's November 6 release, EU banks' non-performing loan ratio stood at 1.99% at the end of June, up 0.03 percentage points over a year. For Hungarian savers this provides comparative context: assessing a domestic bank's risk still requires reading its own financial statements alongside it.

Our calculation derives the change from a previous-year ratio of 1.96%. With an unchanged, illustrative denominator of ten thousand units, the two ratios would represent 196 and 199 units respectively. This example shows the movement in the ratio; measuring the actual change in the stock of problem loans also requires the outstanding amounts.

The denominator includes cash balances at central banks and other demand deposits. Definitions therefore need checking before comparison with another ratio calculated on a narrower loan base. The ECB reported first-half return on equity of 5.31% without annualising it; reading it as a full-year return would be misleading.

The institutional proposals on banking union and the review of pension fund portfolios address different questions but require the same careful comparison. In the next data release, watch whether the ratio and the underlying stock of loans move together, and whether earlier figures are revised.

This keeps a small movement in a ratio separate from an individual bank's loss or a particular Hungarian customer's borrowing cost.