Fitch: QE Unlikely To Boost Eurozone Banks' Earnings Or Kick-start Lending

The European Central Bank's highly anticipated quantitative-easing program is unlikely to do anything to kick-start bank lending in the struggling eurozone, Fitch Ratings said in a note on Monday. The comment comes after the ECB on Thursday announced a bigger-than-expected sovereign QE program aimed at bringing inflation closer to target, partly by boosting bank loans to businesses. "We think QE is unlikely to stimulate lending in the eurozone's crisis-hit economies, despite the start of rebalancing and recovery in some countries," Fitch said. "The economic outlook is still fragile, so demand for credit is likely to remain subdued, and tighter regulatory requirements are making loan growth more difficult for banks." However, some banks may be able to generate higher trading income, the firm said, as the QE program is likely to push down bond yields and increase the trading flow. But "any revenue benefits from sovereign bond sales and trading will probably be offset by lower margins from a flatter yield curve, so the balance is likely to be neutral or even slightly negative for profitability," Fitch said.