Irish banks more potential than others, says Moody's
Irish banks have the potential to show the most notable improvement through 2015 compared to those in Portugal, Italy and Spain, Moody's Investors Service has said.
This is because comparatively higher economic growth in Ireland should offer some boost to these banks' bottom lines and improve the performance of asset portfolios via rising borrower debt-service capability, Moody's said.
The ratings giant said Spanish banks should also perform better over this period as problem loan formation slows and credit costs eases.
In Italy, where economic growth is more sluggish, as well as in Portugal, banks' internal capital generation is likely to remain more subdued for a longer period of time, it added.
It said that Irish banks' asset quality will improve and that the pace of asset-quality erosion will slow in the portfolios of banks in Italy, Portugal and Spain.
"However, capital raising and consolidation efforts will not completely mitigate the banks' asset-quality challenges, and solvency ratios will stay weaker than those in other European countries. Pressure on profitability will persist in Italy, Portugal and Spain, but improve in Ireland, whilst tight funding conditions and bank reliance on ECB funds will ease," it said.