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Moody's changes Czech banking sector outlook to stable

Moody's on Oct. 14 revised the outlook on Czech Republic's banking sector to stable from positive, citing a slowing GDP growth and its expectation that the country's banks will deliver steady performance during the next 12 to 18 months.

Although Czech lenders' loan quality is among the best in Central and Eastern Europe region, it will weaken moderately after several years of rapid loan growth, the ratings agency said.

Czech banks' net profits are expected to improve in 2020 amid rising interest rates and strong lending growth, according to Moody's.

The agency expects that GDP growth will slow down to 2.5% in 2020 and to 2.7% in 2019, compared with 2.9% in 2018.

Big banks in the country hold low-cost and stable deposits that are sufficient to finance their lending, Moody's said, adding that it expects that their funding profiles will remain stable over the next 12 to 18 months.