Monday 07, August 2017 by Nabilah Annuar

Bank rating trends sharply negative in the first half of 2017

Emerging markets dominated the Issuer Default Ratings (IDRs) changes with downgraded 36 IDRs in the Middle East.

Global bank rating trends were sharply negative in 1H17, with downgrades significantly outnumbering upgrades, said Fitch Ratings. The agency changed 92 bank Issuer Default Ratings, making 1H17 the most volatile six-month period in recent years. There were 71 downgrades and 21 upgrades, with more than half of the downgrades related to Fitch’s reassessment of sovereign credit strength.

Emerging markets (EMs) dominated the IDR changes with 57 downgrades and eight upgrades, compared with 14 downgrades and 13 upgrades in developed markets (DMs). Notably, we downgraded 36 IDRs in the Middle East and Africa and 11 IDRs in EM Americas, while all eight upgrades were in EM Europe.

The global distribution of outlooks remains skewed, with 13 per cent of IDRs on negative outlook/watch and only five per cent on positive.

In EMs, the share of negative outlooks (18 per cent) decreased in 1H17 as outlooks stabilised in Turkey, Saudi Arabia, Costa Rica and South Africa (following downgrades), and in Colombia and Panama. At end-1H17, 80 per cent of negative outlooks/watches came from the Middle East and Africa and Latin America, in particular Brazil (14), Qatar (nine) and Mexico (seven). Only two per cent of EM banks were on Positive Outlook.

In DMs, Positive Outlooks at end-1H17 (eight per cent) slightly outweighed Negative Outlooks (seven per cent). This was mainly due to Outlook revisions on six Japanese and six Italian banks to Stable from Negative. In all cases except for one in Italy, the revisions mirrored sovereign rating actions. Positive Outlooks are concentrated in Europe, particularly in Spain where they reflect banks' improving asset quality supported by the economic recovery.

 

 

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