The international rating agency Moody's has changed the outlook of Slovak banks to stable from negative. The outlook change primarily reflects Moody's expectations that the country's macroeconomic conditions will remain supportive, evidence of a stable stock of problem loans and decreasing loan-loss provisions, as well as the banking sector's improved profitability. The sector's liquidity and capitalization levels, relative to anticipated credit losses, further underpin the stable outlook. "Continuing economic growth and decreasing unemployment have contributed to stabilizing the stock of problem loans and to decreasing the loan-loss charges in Q1 2011, whilst macroeconomic developments will be the main driver of asset quality over the next 12-18 months," explains Simone Zampa, Moody's vice president and senior analyst. The agency reminds that profitability within the banking sector more than doubled in 2010, after a significant drop in 2009. Moody's expects this recovery to continue, as demonstrated by the solid level of profitability recorded by the banks in H1 2011, which was 79.5% higher than for the same period in 2010.
