Western European Banks Show Strength Against US Tariff Uncertainties

According to Fitch Ratings, Western European banks are in a strong position to navigate the increasing uncertainties surrounding US tariff measures. The agency highlighted the banks' years of robust performance and solid asset quality as key factors contributing to their resilience.

Potential Risks and Outlook

With only about 4% of bank ratings carrying a 'Negative Outlook,' the sector appears stable. However, Fitch warns that a downturn in economic indicators, such as growth and employment, could lead to a revision of its "neutral" 2025 financial sector outlook to "deteriorating." Banks with significant global trade finance exposure may face quicker impacts from shrinking trade volumes, while domestically focused banks, though more shielded, are not immune to economic fallout.

Impact on Lending and Interest Margins

Fitch had previously anticipated modest lending growth before the recent tariff developments and the 90-day negotiation pause. The agency now predicts that lending volumes could decline further until final tariffs are announced, and lower interest rates may squeeze net interest margins, dampening overall performance.