Global Bank Rating Outlooks Are Still Skewed to the Negative


Tuesday, January 28, 2020  / 7:07  PM / Fitch Ratings / Header Image Credit: Fitch Ratings


Bank rating Outlooks are still skewed to the negative, although less so than six months ago, Fitch Ratings says. The global share of Negative Outlooks was 13% at end-2019 and the share of Positive Outlooks 5%, compared with 17% and 6%, respectively, at end-1H19.


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Emerging markets in the Americas have the highest share of bank ratings on Negative Outlook (31%), mostly mirroring the Negative Outlooks on several Latin American sovereigns. The Middle East and Africa has the next highest share (16%), driven by sovereign-related Negative Outlooks in South Africa and Nigeria, and Negative Outlooks on several Turkish banks, reflecting risks to credit profiles from the challenging operating environment.


In developed markets, most Negative Outlooks are due to earnings pressure amid low interest rates, although several Italian banks are on Negative Outlook due to the sensitivity of their ratings to the Italian sovereign rating (BBB/Negative).


The Outlook balance benefited from the stabilisation of Outlooks on Turkish banks with ratings driven by state or institutional support, following the stabilisation of the Turkish sovereign rating (BB-/Stable) in November 2019. It also benefited from the removal of the Rating Watch Negative on UK banks in December 2019, reflecting the reduced short-term risk of a disruptive 'no-deal' Brexit. Another factor is the higher share of banks without an Outlook following widespread downgrades to the 'CCC' range and below in Argentina and Lebanon, as Outlooks are typically not assigned to banks rated at these levels.


There were 33 downgrades and 46 upgrades in 2H19. Downgrades were concentrated in Turkey (13) and Argentina (six), where they followed sovereign rating actions. Russia and Ukraine accounted for 20 and seven upgrades, respectively, mostly driven by greater sovereign ability to provide support or increased propensity of foreign owners to provide support, following sovereign upgrades.


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