Credit rating agency Moody's says the outlook for Irish banks is still negative.

In its latest report the body says that this position is unchanged since 2008 reflecting the view that the Irish banking system has not yet fully stabilised.

The document says it will likely take the banks "several more years" to fully resolve legacy issues from the crisis.

Moody's also believes that Irish banks will remain under pressure over the next 12 to 18 months because of deteriorating asset-quality and continued dependence on central bank funding.

Despite these factors it still expects the economy to grow this year but at the slower pace of 1.1%.

"Challenging banking environment"

It notes that our growth prospects remain weak due to the fiscal consolidation process, the on-going deleveraging in the private sector, and subdued external demand.

It adds that additional factors that will exacerbate the challenging banking environment and constrain a return to banking stability are "the uncertain economic outlook for key trading partners (especially the UK and the Euro area) and the ongoing Euro area crisis".

Moody's says that although the vast bulk of the land and development loans were transferred to the National Asset Management Agency (NAMA) the arrears remain high on the remaining property exposures.

It also believes that the asset quality of the banks' residential mortgage books will also remain very weak although it recognises that increases in arrears are beginning to slow.

It concludes that on-going liquidity support from the European Central Bank (ECB) remains vital for the banks.