Moody’s cuts outlook for European banks, including Germany, on credit issues

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  • Also affects banks in Italy, Poland and elsewhere
  • Outlook goes from “stable” to “negative”
  • Energy crisis and inflation to weaken economies

FRANKFURT, Nov 2 (Reuters) – Global credit rating agency Moody’s on Wednesday downgraded its outlook for banks in Germany, Italy and four other countries from “negative” to “stable” as the energy crisis and high inflation in Europe is weakening its economies.

The downgrade is also affecting banking sectors in the Czech Republic, Hungary, Poland and Slovakia, and Moody’s said the group includes those most at risk from energy price inflation and possible rationing. Energy.

“We expect operating conditions to deteriorate further,” said Louise Welin of Moody’s.

Some of Europe’s biggest banks have warned of growing risks as the economy slumps after posting stronger-than-expected profits last week.

European bank stocks (.SX7e) have fallen almost 25% from their highs before Russia invaded Ukraine in February.

Moody’s said it expects a decline in bank lending quality, profitability and access to finance.

“Rising prices will affect the creditworthiness of many businesses and households, triggering the formation of new problem loans,” Welin said.

The outlook for British and Austrian banks remained stable, according to Moody’s.

In Germany, government measures to support the economy will not fully offset the challenges facing businesses and consumers, Moody’s said.

“The German economy will go into recession,” he said.

For Italy, Moody’s cited risks of stagflation and expects the economy will not grow in 2023 after expanding 2.7% in 2022.

“Rising prices will affect the creditworthiness of small businesses and households, creating new problem loans,” the rating agency said of Italy.

In Poland, Moody’s said banks will face near-stagnation in economic growth next year, coupled with sharply rising interest rates and inflation, which will “limit opportunities for growth”. .

Reporting by Tom Sims, editing by Rachel More and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

Tom Sims

Thomson Reuters

Covers German finance with a focus on big banks, insurance companies, regulation and financial crime, previous experience at The Wall Street Journal and The New York Times in Europe and Asia.

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