Moody’s to maintain negative outlook for most European emerging banking

In a new special comment, Moody's Investors Service said that in the near term it will likely maintain a negative outlook for most of the banking systems in 12 countries within the Commonwealth of Independent States (CIS), the Baltic States and Eastern Europe.
In the recent past, Moody’s has maintained a negative outlook on all the banking systems it covers in these regions, reflecting the adverse impact of the global financial crisis and the economic downturn on the banks' asset quality, earnings, capitalisation and funding conditions.
In its report, the rating agency pointed out that, for this year, it would likely maintain negative outlooks for banking systems in Ukraine, Kazakhstan, Hungary, Romania, Bulgaria and the Baltic countries, due to continued negative pressure on financial fundamentals and the still challenging economic environment in many of those countries. Evidence of stabilisation have begun to emerge in a few countries however and the agency said that the outlook for the banking systems in Poland, Russia, Slovakia and Czech Republic could be changed to stable from negative in the second half of 2010.
Moody's noted that changing the outlook on any of these banking systems to stable from negative will depend on sustainable improvements in the key credit drivers, including the country's macroeconomic environment, asset quality, revenue generation and funding conditions.
"In light of current uncertainties in the macroeconomic environment, negative credit
trends are likely to persist this year for most European emerging markets banking systems," said Armen Dallakyan, co-author of the report.