...April 24, 2020 - The global recession we expect in 2020 will affect the open and concentrated Icelandic economy and its banks, despite a substantial government package to counteract the effects. It will also exacerbate some of the Icelandic banking industry's weaknesses, such as its low profitability. - In a fiercely competitive environment, distorted by the role of pension funds in lending, with declining interest rates and increasing provisions, the Icelandic banks' business prospects and earnings in the short-to-medium term are weak compared with peers. As such, we are taking a more conservative stance on their industry risk. - At the same time, economic risks for Icelandic banks are increasing due to growing imbalances in the corporate sector, specifically commercial real estate, combined with asset quality deterioration. That said, capitalization remains a rating strength. - We are lowering our ratings on Arion Bank, Islandsbanki hf., and Landsbankinn hf. - The stable outlooks indicate...
