Net fee and commission income to net operating income in Europe Q4 2014-Q1 2023

Net fee and commission income to total net operating income is a measure of profitability for banks. According to the ECB, since the financial crisis, fees and commissions have become an increasingly important income source for euro area banks. The EU weighted average of net fee and commission income to total net operating income has increased overall during the period displayed, peaking at 32.9 as of March 2020. Throughout 2022 and 2023, however, it dropped sharply.

Profitability and stability

Low profitability has been highlighted several times by the ECB as a key risk to the financial stability of the Euro area. Prolonged low profitability can have a knock-on effect to an economy’s growth. On the other hand, sustained periods of higher than average profitability can also mean trouble as was seen in the period running up to the financial crisis.

Other key measures

There are several other metrics that can also be used. Return on equity (ROE), which divides net income by shareholders equity looks at how well a company’s management is using its assets to create profits. Another key measure of a bank's profitability is to look at the return on assets (ROA), which divides a bank’s net income by its total assets during a given period.