Moody's: UK banking outlook changes to negative from stable as operating environment weakens

In a report on the UK banking industry published annually, Moody’s Investors Service on Tuesday, “the outlook for the UK banking system has changed to negative from stable, as a deteriorating operating environment weighs on banks' asset quality and profitability”.

Additional Points:

“Low interest rates and increased competition in the mortgage market are eroding the net interest margins of most UK lenders.

Moody's expects a modest deterioration in profitability, as persistently low interest rates and tough competition in the mortgage market erode banks' margins.

In addition, banks will continue to reinvest cost savings achieved in enhancement of IT platforms and digitalisation of processes and channels.

Some large lenders, however, will likely report higher net profit in 2020, helped by a sharp fall in conduct costs after an August 2019 deadline for compensation claims for mis-sold payment protection insurance (PPI).”

Despite the downgrade by Moody’s on the UK’s banking sector, the pound seems to have ignored the news, as GBP/USD remains well bid near daily highs of 1.2967.

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