Research

Asset disposals are likely to slow over the next 12 to 18 months

By James Langton |

Five large European banks will continue to be dogged by risks stemming from their legacy assets, says a Moody's Investors Service report published Monday.

The five banks — Barclays plc, Credit Suisse Group AG, Deutsche Bank AG, the Royal Bank of Scotland Group plc (RBS), and UBS AG — have continued reducing their holdings of ‘non-core' assets over the past year, the report says, yet they still hold an aggregate US$549 billion worth as of the end June.

The risks related to these remaining legacy assets will continue to weigh on the banks' credit profiles, the report says. It notes that asset disposals are likely to slow over the next 12 to 18 months, "as operating conditions become more challenging and the lower liquidity of the remaining legacy assets makes them more difficult to sell."

In this environment, the banks' earnings are likely to remain volatile, the report says, and "the costs associated with pending litigation and conduct reviews will affect the banks' profitability even after the assets have been sold."