Moody’s keeps negative outlook on Czech banking system

By bne IntelliNews June 23, 2014

Moody’s Investors Service said on June 19 the outlook on the Czech banking system remains negative mainly reflecting the recent adoption of the EU bank resolution framework and the explicit burden-sharing policies that seek to reduce the public cost of bank resolutions.

The outlook has remained unchanged since December 2011 but since the previous Banking System Outlook report published in September 2013 conditions in the domestic economy have improved contributing to a more stable operating environment for local banks over the next 12-18 months, Moody’s said. The low interest rate environment, however, will continue to weigh on lenders' profitability metrics.

Moody's forecasts the Czech economy to expand by 1.9% in 2014 and further gain speed to 2.5% in 2015. The improving economic outlook should support the banks’ financial fundamentals and lead to slight improvements in the asset quality of the manufacturing and trade segments of the loan book, backed by rising export volumes. Yet, the slower recovery of domestic demand exerts a downward pressure on the asset quality of the commercial real-estate and construction segments.

Czech banks have robust capital buffers with the aggregate Tier 1 ratio at 16.8% at end-2013. The banks' funding and liquidity profiles are strong and will likely remain stable over the 12-18 month outlook period. “The sector's loan-to-deposit ratio of 76.8% at year-end 2013 and the relatively low incidence of parent funding will help Czech banks limit the possible impact of any pressure arising from foreign parents, in the relatively unlikely event of worsening economic prospects in Western Europe”, Moody’s said.

Moody’s rates the Czech Republic at A1. 

Related Articles

Poland isolated again as it threatens to block EU declaration

Poland will not sign the Rome Declaration if its demands for moulding the EU’s future are not reflected in the document, Prime Minister Beata Szydlo threatened on March 23. The statement could ... more

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

Poland struggles in bid to oust Tusk

The Polish government spent March 6 canvassing for support for its alternative candidate for the European Council presidency to compatriot Donald Tusk. However, it met little success, even in its own ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss