FRANKFURT (Reuters) -The credit rating agency Moody's (NYSE:MCO) said on Thursday that it was downgrading its outlook for the banking sector in a number of European countries as weak economies erode profits.
It changed the outlook to negative from stable for the banking sectors of Germany, Britain, France, Belgium, the Netherlands and Sweden.
Rising losses for unpaid loans and higher funding costs will chip away at profits, Moody's said.
"A deteriorating operating environment with low economic growth and high borrowing costs will hit credit growth as well as loan performance in the largest European countries, particularly in the corporate sector," said Moody's analyst Effie Tsotsani.
By contrast, Moody's changed the outlook for Italian banks to stable from negative.