Moody's: German banking outlook still negative

19 October 2012

Germany's banking industry is likely to continue struggling in the near future due to a variety of factors, Moody's has warned.

In its latest Banking System Outlook for Europe's leading economic power - which was released this morning (19 October) - the credit rating agency revealed that the outlook for the country's financial sector remains negative.

Moody's cited a number of issues that are contributing to its downbeat expectations for the medium term, including the increasing level of pressure on banks' margins because of the "intense competition" in the sector and low interest rates.

The body pointed towards the fact the ongoing eurozone debt crisis is weakening the German financial operating environment, while rising risk charges are resulting in the quality of lenders' assets deteriorating.

Furthermore, the structural pressure on financiers' earnings is likely to be exacerbated as they refocus on their domestic operations.

"Banks' operating conditions will be challenging in the next 12-18 months, despite Germany's so-far sound economic indicators," Moody's added.

By Claire Archer

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