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2016 is proving a difficult year for banks across Europe, as the industry grapples with nonperforming loans, rocky markets, increasing regulation and exposure to emerging market volatility.
"We start 2016 with a cautious outlook on European banks despite the sector trading at market lows," Bernstein analysts led by Thomas Seidl said in a report this month.
"We downgrade our last year's positive outlook due to a slower-than-expected European recovery despite QE (quantitative easing), margin compression, and the unexpected fall and continuing low oil price with its effect on our emerging markets Brazil, Mexico and Russia," they said.
CNBC takes a look at the challenges hitting banks in the major European countries, ahead of a flurry of earnings next month.
Italian banks faced intense market pressure in January due to concerns about their still very high levels of bad debts. These fears were ignited when the European Central Bank requested further details on nonperforming loan portfolios from banks including UniCredit, Banca Monte dei Paschi di Siena and Banco Popolare.
Shares of these banks plummeted as a result, with almost one-third of the value knocked off UniCredit's stock.
Last week, Pier Carlo Padoan, who has led Italy's Ministry of Economy and Finance since 2014, said markets had panicked unnecessarily after the central bank's request.
"Some information request, which was totally neutral, technical and fine, was interpreted as the way the new world impacts on banks. This is clearly something that needs to be fixed," he said at a CNBC panel at the World Economic Forum in Davos, Switzerland.
On Friday, Reuters reported that Italian banks seeking to sell off bad loans would get a state guarantee for a price 15 to 20 percent higher than otherwise, citing an unnamed source.
On the same day, Standard & Poor's said the measures launched by the Italian government to help work out problematic assets were positive, but unlikely to trigger a sudden clean up of banks' balance sheets.
The ratings agency forecast a wave of consolidation among local and regional Italian banks after the upcoming change to "popolari" banks' legal status.
Deutsche Bank, Germany's largest bank, reported Thursday that it had a record loss for 2015.
It posted a fourth-quarter net loss of 2.1 billion euros ($2.3 billion) and a full-year net loss of 6.8 billion euros, having struggled in 2015 with writedowns, litigation charges and restructuring costs.
The bank in October announced plans to reduce its workforce dramatically and pull out of 10 countries. It also wants to halve the number of clients it has in its global markets and investment banking business.
"We are coming back from a humongous loss position," CFO Marcus Schenck told CNBC on Thursday.
Deutsche Bank shares have declined by around 27 percent since the start of this year. The stock of other German banks has also fallen sharply, with Commerzbank down 22 percent on the year.
Outside of Asia, British banks are among the most exposed in the industry to Hong Kong and mainland China. This increases their vulnerability to the slowdown in the world's second-biggest economy and the disruption in its equity market.
Standard Chartered, an Asia-focused U.K. bank, took action to improve its balance sheet ahead of the Bank of England's latest stress test. This test looked at how financial institutions might struggle if Chinese economic growth slumped to 1.7 percent, among other stressors.
The U.K.'s biggest bank, HSBC, is the largest institution in Hong Kong and the biggest foreign bank in China. It passed the Bank of England's stress test, but on Friday announced that it would curb mortgage provisions to Chinese nationals wanting to buy U.S. real estate. This came after China suspended Standard Chartered and DBS Group from conducting some foreign exchange business, as authorities try to limit capital outflows.
Furthermore, HSBC was forced to apologize to customers on Friday who were locked out of its Internet banking services due to a cyberattack.
London-listed shares of the bank have declined more than 8 percent since the start of the year.
Despite concerns about China, both HSBC and Standard Chartered have publicly mulled redomiciling to Hong Kong or Singapore in response to the U.K. bank levy and increasingly tough regulations in the wake of the global financial crisis.
While Standard Chartered has now ruled a move out, the question is still under consideration by HSBC.
"We continue to be negative on the U.K. banks; with the outlook for margins and growth both bleak, we see very little upside there," Chira Barua said in the Bernstein report.
"Risk will start creeping up and with the push in unsecured lending in 2015 we wouldn't be surprised to see a big pop there at the back end of '16. Capital will continue to be an uncertainty, with many issues yet to be decided," the analyst added.
Correction: This story has been updated to reflect that Standard Chartered took action to improve its balance sheet ahead of the Bank of England's latest stress test.