Moody's maintains 'stable' outlook on France's banking system

Ratings agency Moody’s has decided to maintain its stable outlook on France’s banking system, citing an improvement on their banks' liquidity and funding profiles.

Key quotes

"The outlook expresses Moody's expectation of how bank creditworthiness will evolve in France over the next 12-18 months."

"French banks' main challenges are the still modest economic growth rate in France and Europe, low interest rates -- which put more and more pressure on banks' revenues -- and increased regulatory constraints."

"Moody's forecasts France's real GDP growth to reach a modest 1.3% in 2016 and 1.2% in 2017. However, the period of uncertainty sparked by the UK vote to leave the EU represents a downside risk for the French and European Union (EU) economies."

"Moody's expects the direct impact on the French economy of the UK's vote to leave the EU to remain contained as France is only exposed to a limited extent to a slower growth in the UK; nevertheless, the full consequences of the vote will take time to emerge."

"On the positive side, however, ultra-low interest rates and reduced energy costs have supported a moderate growth recovery, both in France and in the wider EU."

"While Moody's expects French banks' level of non-performing loans to stabilise in 2016, a possible increase in credit costs on some exposures to riskier activities (commodities finance) or geographies (emerging markets) would be overcome by the banks' high level of provisioning and capital."