Moody's: Outlook on UK banking system raised to stable reflecting increased resilience

The US-based credit ratings agency, Moody’s Investors Service, published a latest report on the UK’s banks, explaining the recent outlook upgrade on the country’s banking system.

Key Points:

Moody's Investors Service has raised its outlook on the UK's banking system to stable from negative as banks' stronger credit profiles have increased their resilience to weakening operating conditions. UK banks will remain healthy due to improved capital positions, strong loan quality and robust liquidity and funding positions.

The outlook expresses Moody's expectation of how bank creditworthiness will evolve in the UK over the next 12-18 months.

Mr. Andrea Usai, a Senior Vice President at Moody's noted: “Banks' key credit metrics have generally strengthened relative to a year ago. Although we still expect the operating environment to deteriorate given heightened uncertainty prior to the UK leaving the EU, banks are better placed to withstand the tougher conditions."

"Profitability will remain stable, though with marked differences between banks. Cheap wholesale funding from the Bank of England's Term Funding Scheme will help, and while we expect credit costs to rise for all banks, lower litigation charges should boost earnings for some large banks,"Usai added.