LONDON: Europe’s major banks are facing weaker profitability in 2022 as the war in Ukraine weighs on economic prospects in the region, Fitch Ratings has said in a new report. “We expect loan impairment charges (LICs) to increase from low levels as asset quality deteriorates, but most of the 20 large banks covered in our latest quarterly credit tracker are well-placed to absorb the impact, helped by their sound performance in 2021,” said Fitch Ratings on Monday. Pressure on economic growth due to the war could weaken the banks’ business and financial prospects, while revenue from corporate and investment banking is likely to decline as tailwinds from buoyant capital markets in 2021 fade. However, retail banking should be more resilient and net interest margins could improve, particularly where monetary policy is tightening. The banks reported stronger profits in 4Q21 than before the pandemic, helped by very low LICs. Asset quality remained sound and capitalisation remained a rating strength for most of the banks. Shareholder distributions increased but the uncertainty due to the war may lead some banks to moderate additional distributions, said Fitch Ratings. TLTP
