Trends Update from Fitch Shows Negative Rating Actions are Easing

Fitch Ratings’ latest quarterly ratings trends report highlights that the number of global bank rating downgrades almost halved to 57 in Q112, from their high of 103 in Q411. Upgrades in Q112 were minimal at only eight.

The ‘Global Bank Rating Trends Q112’ report highlights that negative rating actions were centralised in Europe which made up 77% of all Q112 negative rating actions. Developed European countries took the lion’s share, reflecting negative actions taken on seven eurozone countries: Belgium, Cyprus, Ireland, Italy, Slovenia, Spain and Greece. This resulted in negative actions being taken on bank ratings in these regions. Hungary was also downgraded, triggering the downgrade of two Hungarian bank ratings.

If global bank rating outlooks and rating watches were to be combined, these would show a marginally more negative picture in Q112, with 18.8% of global bank ratings on negative outlook/rating watch negative (Q411: 17.8%) and 3.8% on positive outlook/rating watch positive (Q411: 4.3%).

“The broad outlook picture, nevertheless, remains unchanged,” noted Janine Dow, senior director in Fitch’s financial institutions team. “Over 75% of ratings assigned by Fitch to banks globally are on stable outlook. This has held true over the past four quarters,” continued Dow. “However, this should be considered in the context that the rating stock has shifted downwards and the average rating is lower than it was a year ago.”

Emerging markets (EMs) bank ratings are showing greater stability, with only a small number shifting from A (18.4% of total EM bank ratings; Q411: 19.5%) to BBB (35.4%; Q411: 34.8%) and BB (19.8%; Q411: 19.1%).

Bank ratings in developed markets are trending down slightly, with 46.9% in the A range at end-Q112 (Q411: 49.1%) and 26.9% at ‘BBB’ (24.3%).


Related reading