Yesterday, the ratings agency Fitch affirmed its outlook for the Icelandic banks.
Earlier this week, Fitch revised the country outlook for Iceland from “stable” to “negative” citing macroeconomic imbalances.
In a news release yesterday, the company said the Icelandic “banks’ rating Outlooks remain Stable despite the revision of Iceland’s sovereign Outlook to Negative on 21 February 2006”
Fitch said the ratings “take into account Iceland’s macro-prudential risks, including rising inflation, rapid credit growth, buoyant asset prices, a steep current account deficit and escalating external indebtedness. For [KB-bank, Landsbanki and Islandsbanki] these risks are offset to some extent by the banks’ large capital bases, with Tier 1 ratios of 9.4%, 11.9% and 9.9% respectively at end-2005, and by the significant geographic diversification of their loan portfolios, with foreign lending representing between around 35% and 70% of the banks’ loan books at end-2005.”
This morning the Icelandic króna index was at 110, having shot up to 115 mid-week. The index of the Icelandic stock exchange, ICEX-MAIN, was at 6,100, having bounced down to 5,900 from 6,300 mid-week.
Morgunbladid reports on its front page today that, unlike Fitch, the ratings agency Moody’s has not changed its outlook for Iceland. It quotes Kristin Lindow of Moody’s saying “We assign a higher rating to Iceland than Fitch, and we don’t see any reasons for changing our outlook.” Lindow said one reason for Moody’s position was the unusually strong position of the Icelandic treasury.