Moody’s improves its forecast for Italian banks

Moody’s has improved its forecast for Italian banks, and has indicated that transalpine banks will continue to reduce doubtful loans on their balance sheets, in a context of improved financing conditions, and with stable capital levels.

Fabio Iannò, senior vice president and analyst at Moody’s , said that “we expect problematic loans from Italian banks to drop in 2020 for the fifth consecutive year.”

On the other hand, Iannò has stressed that the rating agency has taken into account the forecasts of a weak, although positive, growth of the Italian economy and the stable outlook assigned to the rating of Italian sovereign debt.

However, the expert has warned that the ratio of problematic loans of around 8% remains more than double the average of 3% in the European Union, according to data published by the European Banking Authority (ABE).

Moody’s also expects Italian financial institutions to have a stable or moderately better return between 2019 and 2020 thanks to lower wholesale financing costs, lower cost of risk and efficiency gains resulting from recent restructuring initiatives.

In addition, Moody’s is confident that the capital ratios of Italian banks will remain stable, because almost all entities report capital cushions comfortably above regulatory requirements.

Moody’s Corporation is the parent company of Moody’s Investors Service, a risk rating agency that conducts international financial research and analysis of commercial and government entities.