Liquidity buffers at most large European banks expand in Q1 2025

More than half of Europe's 30 biggest banks by assets recorded improved liquidity buffers in the first quarter, according to S&P Global Market Intelligence data.

Sixteen of the banks in the sample reported higher liquidity coverage ratios (LCRs) as of March 31 versus 2024-end, while 12 registered declines and two reported no change in their ratios.

The LCR is a measure of a bank's ability to withstand cash outflows for 30 days, and large European banks must hold a minimum LCR of 100%.

For the third time in a row, Denmark's Nykredit A/S topped Market Intelligence's quarterly ranking with an LCR of 509.0%. It also reported the highest quarterly increase in the ratio of 42 percentage points.

France's Crédit Agricole SA and Finland-headquartered Nordea Bank Abp logged increases of 13 percentage points and 10 percentage points, respectively, while Austria-based Erste Group Bank AG booked a 7-percentage-point uptick.

In contrast, Norway's DNB Bank ASA saw the biggest decline in the ratio of 24 percentage points, bringing it to 124.0%, the lowest LCR in the sample.

Spain-based Banco de Sabadell SA registered a decline of 13 percentage points, while Swiss giant UBS Group AG and Italian bank Intesa Sanpaolo SpA both had declines of 7 percentage points.

On a year-over-year basis, the trend was reversed as 16 banks with weaker liquidity shields outnumbered the 14 that reported better LCRs. UBS reported the worst LCR erosion of 39 percentage points, followed by Intesa with 21 percentage points.

After Nykredit, Spain's CaixaBank SA and Sabadell had the second- and third-highest LCRs of 206.0% and 197.0%, respectively. On the other side of the spectrum and trailing DNB, French banking group BNP Paribas SA had the second-lowest ratio of 129.9%, followed by German peer Deutsche Bank AG with 134.0%.

Larger banks can sometimes hold less liquidity as they have better access to a wider range of funding sources, such as wholesale funding markets, that they can tap in case of a shortage. They also typically have diversified portfolios that help mitigate liquidity risks and employ more sophisticated risk management practices.

Banks' liquidity positions are a key focus area for regulators, particularly after the 2008–2009 global financial crisis and the more recent 2023 banking turmoil, which saw the collapse of Swiss lender Credit Suisse and some US banks.

In its annual banking supervision report published in March, the European Central Bank called on banks to bolster their resilience and risk management systems to prepare for any adverse impact of the unstable geopolitical landscape, including potential shocks to their liquidity.

Concerns about banks' liquidity resurfaced in April after the prospect of steep US tariffs and economic uncertainty roiled global markets. In response, ECB supervisors ramped up demands for eurozone banks to check on deposits and other forms of funding, Reuters reported.

In addition to shifts in international trade policy, the ongoing war between Russia and Ukraine and tensions in the Middle East are among the developments that contribute to the increasingly volatile geopolitical environment, the ECB said in its report.

– Analyze individual bank liquidity composition using the Bank Regulatory Capital template on S&P Global Capital IQ Pro.  – Learn how to find LCR metrics on Screener.

Meanwhile, 14 banks in the sample booked quarterly declines in their net stable funding ratios (NSFR), led by Raiffeisen Gruppe Switzerland.

Of the 12 banks that logged improved NSFRs over the period, Danske Bank A/S had the highest increase of 7 percentage points, followed by Nykredit with a 6-percentage-point uptick.

The NSFR measures the amount of stable funding available to cover the duration of long-term assets.

CaixaBank and Nykredit had the highest NSFRs of 148.0%, followed by UK-headquartered HSBC Holdings PLC with 146%.

France's Groupe BPCE ranked the lowest with 107.6%, followed by BNP Paribas with 110.1% and by Sweden-based Skandinaviska Enskilda Banken AB (publ) and Switzerland's Zürcher Kantonalbank, which both had 113.0%.