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Brexit, competition ... UK banks are threatened, alert Moody's

Moody's rating agency warns about the outlook for the UK banking sector. She said Tuesday in a statement have revised its outlook on UK banks to "negative" against "stable" previously, which means that the debt rating of some groups could be lowered in the medium term. Several reasons are put forward by the rating agency, starting with the Brexit, scheduled for January 2020, resulting in a slowdown in the UK economy, harmful to the banks' business.

"The UK economy is weakening, making it more vulnerable to shocks, and the long period of uncertainty over Brexit has reduced the country's growth prospects," warns Laurie Mayers, a Moody's manager. A slower economic activity weakens the finances of individuals and businesses and increases the risk for banks of losses on the debts they grant them. In addition, Mayers points to "the persistence of low interest rates and increased competition in the mortgage market."

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Low interest rates, as a result of the very accommodating monetary policies of the major central banks, particularly Anglererre, are affecting bank lending to their customers, thereby reducing profits on these financial transactions. The UK is also a market where the big banks are bending the real estate lending sector, at the risk of pulling down rates and therefore margins. This is particularly the case because of the reform in force since early 2019, which requires a separation between retail and investment banking within each institution.

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As a result, the banks have a lot of capital in the retail sector, funds that previously could have been used in the investment arm, so they have a lot of money to lend, especially in the long run in the industry. 'immovable.

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In all, Moody's expects a slight decline in the profitability of the sector but observes, however, that certain major groups should be able to increase their profits in 2020, notably due to an expected decrease in charges related to the credit insurance scandal.

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This case, which affects the entire sector, was very expensive this year in provision since the injured British had until the end of August to make themselves known to the financial regulator. Moody's had already revised downwards its outlook on German banks at the end of November, mainly because of the low interest rate environment.

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