European Banks Overcome Bad Loans Concerns as Economy Weakens

Europe’s biggest banks are putting aside less capital than expected to support souring loans, as a resilient labor market offsets stresses from the weakening economy.

Before second-quarter earnings started rolling in, analysts had expected lenders to flag deteriorating credit quality as weaker economic growth had to be factored into banks’ modeling of potential loan defaults, according to Bloomberg Intelligence analyst Mar’Yana Vartsaba.

Though lenders including Barclays Plc and Deutsche Bank AGstarted the year by setting aside more than expected to cover for bad loans — amid tariff-related uncertainty and a subdued macro backdrop — they quickly changed tack. ...