Announcement: Moody's maintains its stable outlook on the Dutch banking system

Moody's Investors Service has maintained its stable outlook on the Dutch banking system, reflecting the rating agency's expectation that the country's banks will continue to benefit from the recovery in the domestic economy. The outlook expresses Moody's expectation of how bank creditworthiness will evolve in the Netherlands over the next 12-18 months.

Moody's report, entitled "Banking System Outlook -- The Netherlands" is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

"The return to a benign domestic environment in the Netherlands will allow banks to preserve the improved performance of their assets, which are largely focused on the Dutch economy," says Yasuko Nakamura, a Senior Credit Officer at Moody's.

The Netherlands' economic recovery accelerated in 2015 with 2% real GDP growth, and Moody's forecasts a similar growth pace in the coming years of 1.8% in 2016 and 2% in 2017, as noted in May 2016, slightly above the levels expected for euro-area peers.

As a result, the rating agency expects Dutch loan performance to remain broadly stable. However, Moody's forecasts a slight increase in loan impairment charges compared to 2015 as the particularly low level of loan-loss provisions observed that year was distorted by substantial releases of unused provisions.

In addition, some pockets of risk remain in certain areas including shipping and horticulture. Dutch banks' exposures to the troubled oil and gas sector are also material but the rating agency believes that expected losses on these sectors remain within the limits that can be absorbed by the banks' recurring profits.

Increasing capital requirements are also challenging Dutch banks, but given their improved profits and capital and balance-sheet management plans, Moody's believes that they are well positioned to comply with upcoming regulatory capital ratios.

Banks in the Netherlands also remain heavily reliant on wholesale funding, a credit weakness that reflects large mortgage books with little amortisation, as well as low deposit balances from competition with pension funds and insurance for household savings.

However, they have built comfortable liquidity buffers and lengthened the term structure of their wholesale funding to mitigate risks related to changes in investor confidence, according to Moody's.

Dutch banks' profitability recovered to a sound level in 2015 thanks to materially lower loss provisions. However, the rating agency believes that profits are unlikely to increase further over the outlook horizon because it expects limited growth in lending; in addition, the low interest environment will hamper further improvements in interest margins.

Finally, Moody's assumes a limited likelihood of government support for the majority of banks and only a moderate likelihood of support for banks that are systematically important for the Dutch financial system.