Moody's has changed its outlook for global investment banks to positive from stable in 2018, reflecting improving profitability, broadening global growth, declining tail risk and solid capital and liquidity.
"Profitability will rise, especially in the U.S., while less so in Europe, as interest rates rise and legacy and restructuring costs subside," Managing Director Ana Arsov said in a news release. "Market disruptions or asset price shocks stemming from unexpected changes in monetary policy remain a tail risk." Arsov expects "a well telegraphed and gradual approach" by central banks to support financial stability.
Other factors driving the positive outlook for 2018 include the emergence of operating leverage even as revenue pressures continue. Continued focus on expense discipline will allow for positive operating leverage at more firms, Moody's says.
