2019.10.2310:56:00UTC+00Moody's Lowers Russia's Banking System Outlook

Moody's Investors Service downgraded Russia's banking system outlook to stable from positive citing sluggish economic growth.

"Russia continues to face a range of economic challenges, and reflecting that we have lowered our real GDP growth forecast for the country to 1.2% from 1.6% for 2019," Olga Ulyanova, VP-senior credit officer at Moody's said.

"For 2020, the potential for growth remains weak, at about 1.5%. Even so, the operating environment for banks will be supported by accommodative monetary policy, a relatively stable exchange rate and increased government spending," Ulyanova added.

The rating agency expects banks' problem loan ratio to remain at just below 10 percent of total gross loans over the coming 12 to 18 months. Credit costs will hold steady as the problem loans are well covered by loan loss reserves, Moody's noted.

Further, Moody's said funding and liquidity will remain strong, underpinned by ample deposits, and profitability metrics will be stable.