April 12 (Reuters) - Euro zone banks bolstered their capital buffers and cut their bad debts in the final quarter of 2022, while higher interest rates boosted lending margins, European Central Bank data showed on Wednesday.
Euro zone banks avoided being caught up in last month's global banking volatility, showing the benefits of building up capital strength, while producing some of their strongest profitability figures in years.
The largest banks supervised by the ECB made a return on equity of 7.68% in the final quarter of last year, the highest figure on record since the ECB started compiling such statistics in 2015 and up from 6.70% a year earlier.
The banks had a common equity tier 1 capital ratio of 15.27%, up from 14.74% three months earlier and well above all regulatory requirements. Tier 1 capital is the core measure of a bank's financial strength.
With the ECB raising rates by a record 350 basis points since July, banks have enjoyed higher margins on lending in the past year but also faced the risk that borrowers could struggle to repay loans.
However, with the euro zone economy skirting recession, that did not seem to be an issue, as the ratio of non-performing loans hit an all-time-low of 2.28% in the last quarter of 2022.
This might not please the ECB, which has long complained that banks are too slow in recognising problems and need to be more cautious in a low-growth environment.
