Moody’s Downgrades Finland’s Banking System to Negative
Moody’s says the outlook for the Finnish banking system is negative, reflecting its opinion that a severe contraction of the economy will contribute to a cyclical weakening in banks’ credit fundamentals.
“In Moody’s view, the weakening economic environment in Finland is expected to continue to have an adverse effect on the asset quality and profitability of Finnish banks. The banking system’s problem loans are expected to increase significantly, although from a very low level (0.5% in January 2009). In addition to increased credit risk costs, high funding costs will continue to weigh on banks’ profitability. Fee and commission income is also expected to remain under pressure due to weakened asset management and corporate finance activities.”
In Moody’s view, the recession is expected to result in an increase in problem loans, with loan losses mainly likely to stem from the corporate sector.
“Moody’s notes that the Finnish banking system is characterised by the strong presence of foreign, in particular Scandinavian, banking groups. Foreign banks have a market share of over 50% of both lending and deposits. Currently, the major foreign owned banks Nordea Bank Finland (Stockholm: NDA) and Sampo Bank are supervised by the local FSA.
Moody’s full report is available here.
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