Moody's changes outlook for U.S. banking system to stable

Moody's Investors Service said it changed its outlook on the U.S. banking system to stable from negative, reflecting continued improvement in the operating environment and reduced downside risks to the banks from a faltering economy. The outlook had been negative since 2008.

Moody's expects U.S. GDP growth to be in the 1.5% to 2.5% range in 2013-14, accompanied by a continuing decline in unemployment toward 7%.

"Sustained GDP growth and improving employment conditions will help banks protect their now-stronger balance sheets," Sean Jones, a Moody's associate managing director, said in an agency news release. "In addition, after another year of reducing credit-related costs and restoring capital, U.S. banks are now even better positioned to face any future economic downturn."

The low interest rate environment is the single most important issue that will drive U.S. banks' performance in the next 12 to 18 months, in Moody's view.

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