From the ax of Moody's only the banks of Austria and the United Kingdom survived. For the rest it was a massacre. The US rating agency has in fact lowered the outlook of the banks of Italy, the Czech Republic, Germany, Hungary, Poland and Slovakia from established to negative.
Moody's: the reasons for the decision
At the basis of the decision there are the three scourges that are plaguing the global economy and finance, namely the energy crisis, soaring inflation and interest rate hikes by central banks. All factors that weaken economic growth.
“We have changed the outlook to negative for six banking sectors as we expect a further deterioration of operating conditions, which will weaken the quality of loans, profitability and access to finance for banks, even if the impact will vary from country to country – explains Louise Welin, VP-Senior Credit Officer of Moody's -. Economies are hit by the energy crisis and high inflation following the Russian invasion of Ukraine. The price increase will affect the creditworthiness of many businesses and households, triggering the formation of new problem loans”.
The risks for banks
Not just war, energy crisis and inflation. It will be above all the burden on the banks the increase in interest rates by the ECB which “will affect the creditworthiness of small businesses and households, creating new problematic loans. Weakening lending activity as the economy slows down, higher loan loss provisions and higher operating costs, as well as the repayment of super-cheap ECB funding with Tltro auctions will partially offset the gains from higher lending loan yields as interest rates rise,” Moody's predicts.
Moody's: Italian banks' ratios will remain solid
For Italy, it should be remembered, Moody's estimates zero growth for 2023 from the +0% expected for 2,7.
“We expect Italian banks' capital ratios to absorb rising risks e remain essentially solid. Government measures to alleviate the pressure on businesses and households caused by rising energy costs will also help the banking sector,” the rating agency said in a statement.
In short, despite the change in outlook from stable to negative, Italian banks could be able to withstand the impact of the crisis.
Words that echo those pronounced a few days ago by the Governor of the Bank of Italy, Ignazio Visco, according to whom, compared to the past, the banks are more solid and for this reason they should be "able to absorb the shock" deriving from the slowdown in GDP and the increase in NPLs. According to the number one on via Nazionale: "some banks could encounter greater difficulties", but in any case all will have to pay "particular attention, even with the punctual use of provisions, to the increase in credit risk, thus avoiding that the 'unavoidable tightening of loan offer criteria could turn into a serious credit crunch”.
