UK banking system stable says Moody’s
0Ratings agency Moody’s Investors Services has changed its outlook for the UK’s banking system from negative to stable.
In a report published today the agency gave five main reasons for the improved outlook:
• the UK’s economic situation is increasingly stable despite its low growth prospects
• the outlook for asset quality is improving
• capital ratios continue to improve, driven in part by more stringent capital requirements
• improvements in funding and liquidity metrics is expected to be maintained over the outlook period
• profitability and efficiency ratios are improving because of lower impairments.
Economic growth over the medium term is likely to continue low, but Moody’s is not expecting the operating environment to deteriorate. Furthermore, unemployment has not increased as much as in previous recessions and this has contributed to a stabilisation in banks’ asset quality.
Despite the downside risk posed by some banks’ exposure to commercial real estate and peripheral European economies, Moody’s expects the aggregate level of impairments to continue to decline and non-performing loans to stabilise at around 5%.
