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Global Bank Rating Outlooks Are Now More Skewed to the Negative

July 25, 2019, 08:30 AM
Filed Under: Banking

Bank rating Outlooks have become more skewed to the negative this year, with the global share of Negative Outlooks rising to 17% at end-1H19 from 13% at end-2018, Fitch Ratings says. The share of Positive Outlooks was 6%, down slightly over the period.

Much of the deterioration in Outlooks/Watches was due to the Rating Watch Negative on UK banks, put in place in March. This reflects heightened uncertainty over the outcome of the Brexit process and the increased risk that a disruptive 'no-deal' Brexit could lead to negative rating action, most likely with Negative Outlooks being assigned.

Emerging markets in the Americas have the highest share of bank ratings on Negative Outlook (37%), mostly mirroring the Negative Outlooks on several Latin American sovereigns. Negative Outlooks on Turkish banks also contribute significantly to the global picture.

The number of bank rating upgrades in 1H19 (34) was the highest in recent half-year periods, outpacing downgrades (30), with rating trends broadly positive in developed markets and negative in emerging markets outside Europe. Upgrades were spread across 15 countries and mostly reflected improvements in banks' standalone credit profiles, particularly in Europe.

More than 80% of bank downgrades were in emerging markets, notably in Latin America, with deteriorating local operating environments putting pressure on banks or reducing the scope for them to receive support, if needed, from state authorities or foreign parents.

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