While they face a number of risks, banks’ credit ratings should be fairly stable in the year ahead, says Moody’s Investors Service in a new report.
The rating agency notes in its 2013 outlook for banks that financial market turmoil and subsequent sovereign crises across Europe took a heavy toll on many banks’ credit profiles in 2012, resulting in a substantial number of downgrades. However, Moody’s now expects bank ratings to be relatively stable during 2013.
“While there has been strengthening in many banks’ financial performance, there are a number of interconnected themes with material implications for bank credit that we will closely follow in 2013,” said Greg Bauer, Moody’s global banking managing director.
Those themes include the continued weak global recovery, and still-elevated sovereign risk for many European banking systems; unprecedented low interest rates that dampen profitability and can encourage excessive risk-taking; fragile investor confidence; and, ongoing regulatory reform efforts that will impact risk-taking, capital, liquidity and the resolution of troubled banks.