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Moody’s on StockWatch: How banks will reduce costs

27/06/2022 08:30

Moody's analysts comment on the banks' moves to reduce their costs.

In an interview with StockWatch, Moody's Vice President and Senior Analyst Christos Theofilou notes that the banks' continued investment in digital transformation will increase costs in the short term, but will help them streamline operations, improve customer quality and improve customer quality, boost product and service offerings and reduce costs in the long run.

He points out that banks aim to reduce the cost-to-income ratio, in the midst of further digitization initiatives, staff reductions and streamlining of branches.

Regarding the decision of RCB to become an asset management company, he states that it had a limited impact on the banking system.

For future ratings, he notes that as banks complete their balance sheets, reducing non-performing loans, the focus shifts to building a more sustainable profitability, by increasing revenue and reducing costs.

The agency downgraded the outlook for the Cypriot banking system from stable to positive in a report published on April 27, 2022.

Pressures on the economy

Heiko Peuters, Vice President and Senior Analyst, points to the pressures on the economy amid the Russian-Ukrainian conflict and rising inflation.

He notes that the military conflict between Russia and Ukraine has significantly increased macroeconomic uncertainty.

The agency revised its GDP forecasts for 2022 and 2023 to 2.4% and 2.1%, respectively, from 4.3% and 3.3%, respectively, due to the negative economic impact of the military conflict between Russia and Ukraine.

"We anticipate weaker GDP growth and support measures by the authorities to mitigate the effects of sharply rising energy prices," he said.

State support measures and substantial European Union funding are limiting the impact of the pandemic, and any liabilities from the crisis are likely to remain modest.