Outlook for European banks turns negative as economic growth weakens

Moody’s has changed the outlook for European banks to negative from stable, as weakening economic prospects in much of the region will cause loan quality and profitability to deteriorate.

The outlook for euro-area banks is negative as the economic slowdown and continued accommodative monetary policy will erode already weak profitability. In the UK, the outlook for banks is also negative as Brexit-related uncertainty will weaken operating conditions and slow loan demand. In the Nordics, Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) the outlook for banks remains stable as the operating environment will continue to be supportive.

“The UK and German banking systems account for the largest share of banking assets in the region and drive the overall negative outlook,” said Carola Schuler, an MD for Banking at Moody’s.