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Moody's revises outlook on Finnish banking system

Moody's on Dec. 15 revised to stable from negative the outlook on Finland's banking system, reflecting the agency's view that a moderate upswing in the Finnish economy will support banks' credit profiles.

"The key factor driving our stable outlook for the Finnish banking system is the more robust outlook for the Finnish economy, which started to recover in 2015 after a three-year recession," said Mathias Kuelpmann, a senior vice president at Moody's. "We also expect asset quality in Finland to stabilize and even improve slightly amid continued low interest rates and a stable housing market."

The agency expects Finnish banks' nonperforming loans to gradually improve over the next 12 to 18 months, after peaking at 2.6% of gross loans at the end of 2015, although it also believes that core bank earnings will remain under pressure from the low interest rate environment.

Funding and liquidity for Finnish banks are also expected to remain sound over the outlook period.