European banks will be weakened further by poor economic conditions and high litigation costs in 2015, according to Moody’s Investors Service. Banks’ profits in the region, with the exception of the U.K. and Scandinavia, may be exposed to “economic tailwinds,” hurting loan demand and the value of transactions, Moody’s said in a statement today. The region’s banking industry may need to cut costs further and make more adjustments, it said.
“Weak macroeconomic conditions weigh on Europe’s banking sector, and low overall bottom lines implies that the European banking industry remains structurally vulnerable,” Carola Schuler, Moody’s managing director of Europe, the Middle East and Africa banking, said in the statement.
The European Central Bank last week reduced its euro-area growth and inflation forecasts for 2014 to 2016, while Germany’s Bundesbank also cut its economic outlook. It comes as litigation expenses continue to weigh on European banks from investigations into the manipulation of benchmark interest rates to currency markets.