German lenders are in a uniquely dangerous position compared to their European counterparts, according to Ronit Ghose, global head of banks research at Citi.
, after Matteo Salvini's Lega party blew up the governing coalition arrangement, but speaking to CNBC's "Squawk Box Europe" on Thursday, Ghose said that from a profitability perspective, German lenders are in "a much worse position" than their Italian counterparts.
"The Italian banks have done some cleanup on their balance sheets, like the Spanish banks. The Germans next year are going to make 2-3% return on equity , and this year will be even worse," he said. Restructuring and cost cutting now permeate European banks' strategies, but Ghose suggested the most effective programs have been concentrated in Scandinavia and the Benelux region .
"Over the last 10 years they've halved branch networks, cut headcount, and they've done it because of two things: they have flexible labor markets, and they have smart management teams. They are forward-looking, they have used digitization and restructuring well," he said. During the last earnings season, however, French banks showed early indications of progress in restructuring efforts on the whole."The French began to talk about cost-cutting, they're going to show some progress, and the market is waiting for that."
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