Increased competition and low interest rates to impact the banks over the next year.
By BOHEMIST STAFF
PRAGUE – American rating’s agency Moody’s yesterday maintained a’stable’ outlook on the Czech banks with the caveat that profitability is likely to decline in the foreseeable future to due increased competition and low interest rates, the firm announced yesterday.
According to the agency, the stable rating comes as a reflection of its expectation that moderate economic growth and improving employment levels in the country will support bank loan quality. At the same time, the banks can also expect a slight increase in credit costs from historical lows, as well as falling fees on credit and debit cards.
“Czech banks are facing potential headwinds on several other fronts. The UK vote to leave the European Union, for example, may pose risks in the form of slower economic growth in Europe, a key market for Czech exports. In addition, diverse views within the Czech coalition government could hinder economic reform, as noted in June 2016, and prolonged low oil prices and a drop in food prices could expose the country to the risk of deflation,” the statement reads.
Still, not all the news is bad. Moody’s noted that the economy remains in good stead and that the banks stand to benefit from benign operating conditions over the next 12-18 months.
“We expect Czech banks’ nonperforming loans to remain at about 5.8% of total loans over the next 12-18 months — one of the lowest levels in Central and Eastern Europe — amid moderate GDP growth and rising employment,” said Arif Bekiroglu, an assistant vice president at Moody’s.