The insolvency of Austrian property firm Signa is expected to result in a drag on the credit quality and profitability at some banks in Europe, including Switzerland.
The insolvency of René Benko’s Signa will impact the credit quality and profitability of some Austrian, German and Swiss banks, according to a Moody’s note without disclosing the name of specific institutions.
Non-performing loans and risk costs are expected to rise in the fourth quarter of this year. While most of Signa’s bank loans were secured, the credit rating agency noted that there will still worries about decreasing asset value.
«However, the declining valuations of the underlying pledged assets […] imply additional risks, increasing potential losses in the work out of defaulted loans,» Moody's said.
