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Finnish banks maintain stable outlook on strong networks, limited risk

www.financialmirror.com

The credit outlook for rated Finnish banks remains stable, reflecting their strong domestic franchises, limited risk appetite and good financial fundamentals, Moody's Investors Service said in its new Banking System Outlook for Finland. Fierce competition and ongoing pressure on margins remain key challenges going forward.

"The market turmoil in the second half of 2007 has so far had marginal impact on the Finnish banks, which have limited indirect exposure to the US sub-prime market or structured investments. Although the widening of credit spreads has affected the valuation of the banks' fixed-income portfolios, their trading operations are relatively limited," said Kimmo Romo, a Moody's Vice President and author of the report.

Meanwhile, the core customer businesses of all major banks have continued to benefit from the buoyant economic environment. As regards liquidity, the Finnish money market has functioned despite the turmoil -- some larger banks have even reported increased demand for their paper in the interbank market. The prudent policies that the Finnish banks follow have thus resulted in them being seen as safer counterparties, Moody's notes.

The Finnish banking system appears to be the most concentrated of the Nordic countries, with the three largest banking groups -- Nordea Bank Finland, OP-Pohjola Group and Sampo Bank -- together controlling about 75% of total lending. It is also characterised by a stronger presence of foreign, particularly Scandinavian, banking groups, which together have over a 50% market share of both lending and deposits.

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