With the database now updated to include data for 2023, we can explore the developments in the euro area and Western European banking sectors. A natural starting point is to examine how profitability has evolved throughout the 2020s. For this analysis, we use the variable ROA (Return on Assets), which represents the pre-tax profit relative to total assets (expressed as a percentage).
The figure below highlights a steady increase in the banking sector’s profitability over most of the period from 2009 to 2023. It also indicates a strong recovery following the COVID-19 crisis, which is not surprising given the significant shift in the interest rate environment after a prolonged period of negative rates. In the sample countries, short-term interest rates rose from -0.23% to 3.9% between 2021 and 2023. Notably, average profitability during the COVID-19 period remained above the levels observed during the sovereign debt crisis.
The next figure displays the number of observations for the ROA variable by year. It shows that there are slightly fewer observations for the earlier years in the sample. However, from 2013 onward, the number of ROA observations stabilizes between 120 and 130 per year, totaling 1,850 observations overall.
After accounting for overlapping ownership structures using a pre-built indicator variable, the total number of observations decreases to 1,629. From 2013 onward, the annual number of observations is reduced to 110–120. Depending on the regression model, the number of observations in regressions explaining ROA typically ranges between 1,400 and 1,500. Hence, don’t miss the opportunity to use the Significant Bank Database in your research and analyses!
