Moody’s: Rising interest rates will support US banks versus its global peers

The US-based ratings agency, Moody’s Investors Service, is out with its latest report on the interest rates divergence between the US banks and its European counterparts.

Key Points:

Expect US Federal reserve to progressively increase interest rates over 2017/2018

Rising interest rates will support US banks net interest margins and income

Expect European rates to remain very low in 2017/2018

Continued re-pricing of loans will intensify profitability pressures

When short-term interest rates eventually rise in Europe, some banks exposed to long-term fixed assets would face a profit shock

Diverging interest rates will widen profitability gap between US banks and global peers