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European banks showed varied levels of operational efficiency, with Bulgaria front-runner in the thirs quarter of 2025. The cost-to-income ratio (CIR), a key indicator of bank profitability, reveals significant disparities across EU countries. In the third quarter of 2025, Bulgaria's banking sector boasted the lowest CIR at ** percent, followed closely by Portugal, Poland, and Greece, indicating their high operational efficiency. In contrast, Liechtenstein, France, and Hungary faced challenges with higher CIRs, suggesting room for improvement in their banking operations. Similar differences can also be observed at the individual bank level, where some of the largest European banks reported CIRs well above ** percent in 2023.

Recent trends in the EU banking sector

The European Union's banking industry has experienced notable fluctuations recently, which was reflected in the EU's aggregate cost-to-income ratio. In the first quarter of 2020, the COVID-19 pandemic caused the CIR to spike to percent, the highest in recent history. However, the sector has since rebounded, with the CIR stabilizing around ** percent throughout 2024. This improvement coincides with a significant increase in total operating income, which reached *billion euros in 2024, up from a low of * billion euros in 2020.

Profitability and growth outlook

Despite challenges, the EU banking sector has shown resilience and growth. The operating income growth rate reached approximately ****percent in 2024, the highest in the observed period. This positive trend is particularly noteworthy following the substantial decline in income growth during the 2020 pandemic-induced economic contraction. As banks continue to adapt to changing economic conditions, their ability to maintain low CIRs while increasing operating income will be crucial for sustained profitability and stability in the European financial landscape.