Irish banks continue to be the most profitable among their European peers and should maintain this position for some time, according to a new report by international ratings agency Moodys.
It has issued a stable ratings outlook for Irish banks based on strong financial fundamentals despite the weakening economy. In its latest report, Moodys notes that Irish banks continue to enjoy higher profitability than their European peers as well as good asset quality levels.
It suggests the outlook for the Irish banks remains stable and it has not adjusted its ratings for the major financial institutions. The large Irish banks have ratings averaging at Aa3/B with smaller banks assigned an A3/C rating.
"Although economic growth forecasts for 2002 and the near future are much lower than the growth levels enjoyed in Ireland in the late 1990s, they are still higher than for most other European states," according to Ms Elisabeth Rudman, a senior analyst and vice-president at Moodys.
The Irish banks have reported slower profit and lending growth while weak equity markets have also affected their insurance businesses and sale of equity products.
"However, barring a further downturn in the global economy, which would have a knock-on effect on the Irish economy, the current levels of profitability appear sustainable," she added.
Provisions for loan losses are likely to increase in 2003, but Moodys believes the quality of bank assets remains sound. The only banks with a significant overseas presence, such as AIB, Bank of Ireland and Anglo Irish Bank, have a limited exposure to troubled sectors, says to the report.
