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Fitch Ratings says most large European banks have enough capital to weather declining asset quality and earnings pressure without facing credit rating downgrades.

“We expect moderate deterioration in asset quality and earnings, but high capital buffers should continue to support the banks’ ratings,” the rating agency said in a report.

So far, rising credit losses due to the economic fallout from the Russian invasion of Ukraine have been within the rating agency’s expectations, the report said, adding that most of the big banks maintained “sound asset quality and capital” in the first quarter.

Looking ahead, Fitch said it expects only a moderate increase in credit losses in 2022. However, “the banks still face material risks to asset quality and loan growth due to macroeconomic pressures from rising commodity prices, supply-chain disruptions and coronavirus-related restrictions in China.”

Additionally, while the banks’ operating costs are increasing amid high inflation and growing regulatory and technology expenses, rising interest rates should boost the banks’ margins and revenues, the report said.

Bank capitalization “remains strong” at the end of the first quarter, Fitch said, with the median buffer sitting at 420 basis points above minimum capital requirements — “which is comfortable.”