Report: European banks to struggle, may need to cut costs

European banks are likely to struggle to make profits in months ahead and may need to cut costs, merge or change their business strategies to return to solid health, the European Central Bank said Tuesday.

The banks' woes present a hurdle for the economy of the 19-country eurozone, where lenders are the source of most financing for business, unlike the United States, where companies more often issue debt on capital markets.

In its review of financial stability in the currency union, the ECB said the region's banking system had weathered volatility in markets at the start of the year, and remained stable. However, it said that "most risks have increased" since the...