European banks optimistic on outlook, study shows

(FRANKFURT) - European banks are optimistic about their business outlook for the next six months, even though the economy is set to deteriorate further in a number of countries, a study found on Monday.

Consultants Ernst & Young found in a survey that 37 percent of European banks are expecting an improvement in their operational activities in the period, while 24 percent were forecasting a deterioration.

About 39 percent expected stagnation, the study found.

Optimism varied from country to country, with up to 59 percent of British banks counting on an improvement, 51 percent of Italian banks, 45 percent of Scandinavian banks and 37 percent of Spanish banks.

"Italian and Spanish credit institutions believe their countries are over the worst of the debt crisis and their business is set to improve," said one of the study's co-authors, Dirk Mueller-Tronnier.

Emergency measures by the European Central Bank, such as the unprecedented amount of liquidity it had made available to banks and its bond-purchase programmes, had helped reassure banks in crisis countries, said the other co-author, Claus-Peter Wagner.

In France, the sector was divided, with 30 percent of banks forecasting an improvement and 30 percent a deterioration.

In Germany, where the economy contracted by around 0.5 percent in the fourth quarter of last year, banks are more pessimistic, with only 25 percent predicting an improvement and 39 percent a deterioration.

Overall, 41 percent of banks said they were projecting a further drop in economic growth over the next six months, while only 19 percent were hopeful for an improvement.

Thus, 45 percent of banks said they planned to downsize their workforce and cut jobs, particularly in their back-office operations.

For its survey, Ernst & Young questioned a total 269 European banks in November and December.