Western European Banks' Resilience in the Face of US Tariff Measures

According to Fitch Ratings, Western European banks are in a strong position to navigate the increasing uncertainty surrounding US tariff measures. The agency highlights that, after years of robust performance and solid asset quality, most lenders have fortified their ratings to better withstand market shocks.

Potential Risks and Outlook Adjustments

With only about 4% of bank ratings currently carrying a 'Negative Outlook,' the situation seems stable. However, Fitch warns that a deterioration in economic indicators, especially in growth and employment, could prompt a shift from a "neutral" to a "deteriorating" financial sector outlook for 2025.

Impact on Global and Domestic Banks

Larger banks with exposure to global trade finance may face quicker impacts if trade volumes decline. Conversely, domestically focused banks, while more shielded, are not immune to potential economic fallout.

Projections Amid Tariff Negotiations

Prior to the latest tariff developments and the 90-day negotiation pause, Fitch had anticipated modest lending growth. The agency now foresees a dampening in performance, attributed to a further decline in lending volumes and reduced net interest margins, at least until final tariffs are announced.