BERLIN, Oct. 19 (Xinhua) -- Ratings agency Moody's maintained its negative outlook for German banks in a report issued on Friday, citing mounting stress, meager profits and rising risk for the industry.
"Intense competition and low interest rates are causing margin pressure that will likely further erode the banks' already weak revenues and profits over the 12 to 18 month outlook period," Moody's said in a statement.
The ratings agency said other main drivers of the outlook include a weakening operating environment amid recessionary trends across Europe, rising risk charges and deteriorating asset quality, and the limited loss-absorption capacity of many banks.
Banks' operating conditions will be challenging in the next 12 to 18 months despite Germany's so far sound economic indicators, Moody's said.
It predicted that German GDP will likely grow between 1 and 2 percent in 2013, but warned that significant downside risks from the ongoing eurozone crisis will persist in view of the German economy's high dependence on other EU countries for its exports and the resulting economic interdependence with other European nations.
The report warned many German banks were vulnerable to a worsening of the sovereign debt crisis in Europe and to macroeconomic stress, adding that high balance-sheet leverage and low pre-provision profits will make it difficult for many German banks to cope with unforeseen losses.