This week, Germany’s Berenberg disclosed accounting and valuation failures linked to attempts by its former management to influence regulatory capital and reported profit. Emirates NBD absorbed higher impairments as its acquisition of India’s RBL Bank expanded the UAE lender’s balance sheet and international exposure. Santander and UniCredit retained capital headroom despite higher provisions and strategic investments, while BNP Paribas reached its 13% CET1 target ahead of schedule. Meanwhile, Julius Baer’s continuing remediation constrained asset gathering, demonstrating the commercial consequences of tighter risk controls. Read more on the week’s key developments: 1. Germany’s Berenberg reports 75% profit fall after disputed transactions Berenberg disclosed that the accounting and valuation of certain equity transactions held in its proprietary portfolio had not complied with commercial-law requirements. A subsequent forensic investigation found a pattern of measures substantially driven by attempts to manage regulatory own-funds and equity-capital effects and, in some cases, to create, smooth or accelerate reported profits. After incorporating adjustments related to the disputed transactions, Berenberg reported net profit of EUR 20.2 million ($23 million) for 2025, down from EUR 81.6 million ($92.8 million) a year earlier. Its Tier 1 capital ratio declined to 12.1% from 12.9%, while the total capital ratio fell to 13.9% from 14.5%. Although both remained above regulatory requirements, the episode raises fundamental questions about governance, management incentives and the reliability of the controls governing regulatory-capital calculations. 2. UAE’s Emirates NBD expands loans 17% after RBL Bank consolidation Emirates NBD’s gross loans increased 17% to AED 771 billion ($210 billion) during the first half as the group completed the consolidation of RBL Bank. The acquisition added AED 74 billion ($20 billion) of assets, AED 44 billion ($12 billion) of loans and AED 43 billion ($12 billion) of deposits, helping lift the group’s balance sheet above AED 1.3 trillion ($354 billion). Impairment allowances stood at AED 1.4 billion ($381 million), while the cost of risk was 42 basis points. The acquisition materially increases Emirates NBD’s scale and geographic diversification, but it also introduces integration, credit-quality and capital-allocation risks. The key test is whether the group can maintain its impaired-loan ratio of 2.1% and existing capital and liquidity buffers as RBL Bank is integrated and lending continues to expand across several markets. 3. Switzerland’s Julius Baer says risk remediation will constrain growth into 2027 Julius Baer said progress in attracting net new money remained affected by the continuing implementation of its revised risk and compliance framework. The bank expects the impact to persist into 2027, although it maintained its target of achieving annual net new money growth of 4% to 5% by 2028. The framework followed losses associated with Signa and a broader review of the bank’s private-debt and mortgage portfolios. Its drag on growth shows the commercial cost of remediation, as tighter onboarding and lending controls constrain asset gathering while rebuilding risk-governance credibility. 4. Spain’s Santander holds 14% CET1 ratio as loan-loss provisions rise 9% Santander’s first-half loan-loss provisions increased 9%, mainly because of broader credit trends in Argentina. Excluding Argentina, provisions were broadly stable. The bank’s cost of risk remained at 1.15%, while its non-performing loan ratio improved by seven basis points from the previous quarter to 2.93%. Its Common Equity Tier 1 ratio stood at 14.0% after absorbing a 55-basis-point effect from the acquisition of TSB. Santander generated a further 20 basis points of capital organically during the second quarter and remained above its year-end target range of 12.8% to 13%. The figures suggest that higher provisions remain manageable, although the completed TSB acquisition and proposed Webster acquisition commit part of Santander’s capital surplus. 5. Italy’s UniCredit holds 14.3% CET1 ratio despite larger Commerzbank exposure UniCredit reported a Common Equity Tier 1 ratio of 14.3% for the second quarter. The ratio would have been 14.5% excluding the temporary effect of its increased Commerzbank position and 15.0% after including the expected benefit of the Danish Compromise and the reversal of temporary risk-weighted-asset effects. The bank retained EUR 1.6 billion ($1.82 billion) of credit overlays and reported a first-half cost of risk of 17 basis points. Capital generation supported EUR 4.7 billion ($5.35 billion) of accrued shareholder distributions despite risk-weighted-asset growth and the effects of its strategic holdings. The central question is whether UniCredit can preserve this headroom as its larger Commerzbank position increases concentration, valuation and regulatory risk, particularly if it seeks greater control of the German bank. 6. France’s BNP Paribas reaches 13% CET1 target ahead of 2027 deadline BNP Paribas reached its 13% Common Equity Tier 1 ratio target ahead of its original 2027 deadline during the second quarter. The bank had based the target on stronger organic capital generation, moderate annual growth in risk-weighted assets and faster disposals of non-strategic assets. Reaching the target early gives BNP Paribas greater capacity to absorb business growth and AXA Investment Managers integration costs. The next test is how much of that headroom it preserves as risk-weighted assets grow and how much it returns through distributions. 7. India’s IndusInd Bank improves gross NPA ratio to 3.25% as liquidity buffer narrows IndusInd Bank’s gross non-performing asset ratio improved to 3.25% at the end of June from 3.43% three months earlier, while its net non-performing asset ratio declined to 0.95% from 1.00%. Its provision coverage ratio stood at 71%, and its capital adequacy ratio increased to 17.15% from 16.63% a year earlier. The figures indicate some sequential stabilisation in reported asset quality following the bank’s earlier accounting and governance problems. However, its average liquidity coverage ratio fell to 127% from 141% a year earlier, while advances contracted year on year. The combination points to a bank improving its impaired-loan position but still operating with less liquidity headroom and subdued balance-sheet growth. 8. Spain’s Banco Sabadell launches EUR 331 million buyback with CET1 ratio at 13.11% Banco Sabadell announced a new EUR 331 million ($377 million) share-buyback programme after reporting a fully loaded Common Equity Tier 1 ratio of 13.11%. The programme, equivalent to approximately 2.1% of its share capital, follows an extraordinary dividend funded by the sale of TSB. Performing loans increased 5.5% year on year, while the non-performing loan ratio improved to 2.47% from 2.55% in the previous quarter. The buyback pairs shareholder distributions with continued loan growth, making organic capital generation central to Sabadell’s strategy. Further distributions will depend on whether earnings offset the additional capital demands from continued lending growth. 9. US-based Flagstar authorises $250 million buyback as CRE concentration falls to 350% Flagstar Bank reported $1.1 billion of commercial real-estate (CRE) loan payoffs during the second quarter, of which 39% involved loans classified as substandard. Its commercial real-estate concentration ratio declined to 350% from 367% in the previous quarter, continuing the reduction of its multifamily and commercial-property exposure. The bank nevertheless authorised a $250 million share-repurchase programme after reporting a Common Equity Tier 1 ratio of 13.16%, up from 12.83% a year earlier. Executing the programme would reduce capital available to absorb further property-related losses, creating a tension between shareholder distributions and continued balance-sheet de-risking. 10. US-based First Citizens records $10 million credit-loss benefit after reserve release First Citizens reported a $10 million credit-loss benefit for the second quarter, compared with a $72 million provision in the previous quarter. A $34 million provision for loan and lease losses was more than offset by a $44 million benefit related to off-balance-sheet credit exposures. The bank attributed the reserve release partly to improved credit quality, updated loss models, revised macroeconomic assumptions and growth in lower-risk capital-call lending. Net charge-offs edged down to 0.29% of average loans, but non-accrual loans remained unchanged at 0.96% of total loans. The release supported near-term earnings, although its sustainability depends on whether the assumed credit improvements prove durable. The Risk and Capital Weekly Brief tracks developments affecting banks’ credit risk, capital strength, liquidity and operational resilience.
