S&P acts on Icelandic banks

S&P said it revised the outlooks for Islandsbanki hf and Landsbankinn hf to positive from stable and its outlook for Arion Bank to stable from negative.

“In our view, the economic risks facing Iceland's banks are receding in tandem with a stabilizing housing market and unwinding private sector leverage, leading us to see the economic risk trend as positive. While residential property remains overvalued by most measures, price growth has gradually abated since its mid-year 2022 peak and we now expect a mild correction in real terms in 2023 and into 2024,” S&P said in a press release.

“We expect Iceland will continue to post solid growth following an already substantial recovery from the pandemic-induced recession, with GDP growth of 3.8% in 2023 and averaging 2.5% in 2024-2026. We see also industry risks affecting the banking sector as broadly stable, with incumbent banks remaining profitable and well-capitalized, leaving them in a good position to fend off bank and nonbank competition,” the agency added.

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