After the sensational cut to France's triple A, Moody's confirms the negative outlook on Italian banks. In the report "Banking System Outlook: Italy", the American rating agency explains that four factors affect the prospects of institutions, which became increasingly serious during 2012: adverse operating conditions, deteriorating asset quality, weak profitability and limited access to credit.
Although the capital positions have improved - writes Moody's - capital levels they remain vulnerable and below those of the main European banks. The agency then underlined that the assessment is also conditioned by the persistence of negative conditions and risks which will most likely remain for the next 12-18 months.
Italy's GDP, according to Moody's, will drop by 2-3% this year and 1% next year. Against this backdrop, the quality of banks' assets is expected to further deteriorate. There profitability already modest, it will continue to deteriorate, limiting the ability of institutions to generate capital through internal resources. Furthermore, the pressures associated with the crisis affecting the Eurozone will make it difficult for banks to access the credit market.
Recalling that Italian banks are in second place among those that have drawn most from ECB funds, Moody's wrote that institutions are trying to reduce their dependence on the Eurotower, but deleveraging operations such as to record a substantial reduction in needs of capital could have negative consequences on earnings.
