Business · Markets · 2 hrs ago
European banks have room for payouts, but growth is expected to slow
European banks paid a record €81 billion in dividends from 2025 earnings and continued share buybacks.
A Morningstar DBRS assessment says the sector remained strong in the first half of 2026, supported by steady profits and contained loan problems.
Banks held average top-quality capital above 15% and a buffer of about 450 basis points over minimum regulatory requirements.
That capital gives banks room to absorb unexpected losses without immediately taking extraordinary steps to strengthen their finances.
But dividends, share buybacks, acquisitions and some higher regulatory requirements are gradually reducing that cushion.
Shareholder payouts are expected to stay high but grow more slowly as profits moderate and banks approach their own capital targets.
Banks will need to balance returns to investors with funding business growth and keeping enough capital to withstand a possible economic downturn.
European banks distributed a record €81 billion in cash dividends from 2025 earnings, while continuing share buybacks.
Morningstar DBRS says the sector remains solidly capitalised and able to absorb potential economic and geopolitical shocks.
Average CET1 capital remained above 15% in the first half of 2026, with an average buffer of about 450 basis points over regulatory minimums.
The agency expects shareholder payouts to remain high but grow more slowly as profitability moderates and banks approach internal capital targets.
Payouts, acquisitions and higher regulatory requirements are gradually reducing banks’ safety margins.
- Who
- European banks, assessed in a report by Morningstar DBRS.
- What
- Banks have capacity for substantial shareholder payouts, but those payouts are expected to grow more slowly.
- When
- The report describes the first half of 2026 and forecasts the next 12 months.
- Where
- Europe.
- Why
- Profitability is expected to moderate, while payouts, acquisitions and some higher regulatory requirements reduce capital margins.
This story does not have two clearly opposing sides.
European banks distributed a record €81 billion in cash dividends.
Banks maintained average CET1 capital above 15% and an average buffer of about 450 basis points over regulatory minimums.
Analysts expect Banco Sabadell, Banca Monte dei Paschi, Intesa Sanpaolo and BPER Banca to have dividend yields above 7%.
- Cash dividends
- €81 billion from 2025 earnings
- Average CET1 ratio
- Above 15% in the first half of 2026
- Capital buffer
- About 450 basis points over regulatory minimums
- Expected dividend yields
- Above 7% for Banco Sabadell, Banca Monte dei Paschi, Intesa Sanpaolo and BPER Banca over the next 12 months
What people are saying
the margin available to respond to new risks is gradually shrinking