Moody’s: UK banks show resilience with Brexit ahead

LONDON • UK banks are better placed to withstand a slowing economy as the country exits the European Union, Moody’s Investors Service said.

Moody’s raised the outlook on the nation’s banks to ‘Stable’ from ‘Negative’, according to a report yesterday. Strong capital positions, loan quality and funding should underpin profitability even as the economy slows, while additional costs associated with preparing for Brexit will be “moderate”, it said.

A report this week by Oliver Wyman Inc had said UK lenders may need to find as much as US$50 billion (RM214.29 billion) of additional capital.

“We expect UK banks’ solvency to remain robust, with broadly stable profitability and liquidity as well as strong funding positions, despite our expectation over the next 12-18 months of a modest deterioration in operating conditions,” Laurie Mayers, an associate MD at Moody’s, said in the report.

Moody’s said it placed Lloyds Banking Group plc on review for an upgrade as it determines whether improvements in asset risk and profitability are sustainable at Britain’s biggest mortgage lender. The review will take into account the prospect of falling costs for past misdeeds, including the payment protection insurance scandal that has so far cost the bank £18 billion (RM102.86 billion).

Moody’s action reflects “significant improvements made by the bank in areas such as profitability, asset quality and funding profile”, Lloyds said separately. — Bloomberg