Fitch Ratings says that over 70% of Outlooks assigned to bank ratings globally are Stable. This considerable degree of stability has persisted for a while, holding true for over five quarters. Nevertheless, the gradual negative shift in ratings continues. A newly-published report highlights that 21.5% of global bank ratings in Q212 are on Negative Outlook/Watch (Q112: 18.8%) and 3.6% on Positive Outlook/Watch (Q112: 3.8%).
Developed markets (DM) took the lion’s share of downgrades in Q212: a high 60% of Q212 downgrades occurred globally in DM, often triggered by sovereign rating actions. During Q212, in the DM, Fitch downgraded the sovereign ratings of Spain, Greece and Japan. The downgrade of Spain’s sovereign’s ratings in June resulted in 18 Spanish banks being downgraded in Q212. At the same time, subsidiaries of some Spanish banks whose ratings are based on parent support were downgraded in various regions. The Japanese sovereign downgrade occasioned a revision of rating alert to Negative (from Stable) on Japanese banks which also explains the concentration of downgrades in the DM.
The Outlook on bank ratings in the emerging markets (EM) worsened in Q212, as the proportion of Negative Outlooks increased in EM Asia, EM America and EM Europe. The rating actions were either in response to similar actions taken on sovereign ratings, notably in India, Venezuela, Cyprus and Egypt or on parent banks’ ratings, reflecting the high proportion of support-driven bank ratings in these markets.
Rating category migrations, quarter-on-quarter, are gradual but the overall shift is down. Within DM, ‘A’ category bank ratings still concentrate the largest proportion of ratings globally (44.% at Q212 against 46.9% at Q112) but ‘BBB’ category rated banks are growing: 28.4% at Q212 (Q112: 26.9%). In EM, ‘BBB’ category rated banks represent 36.4% of total EM bank ratings (Q112: 35.4%) while bank ratings in the ‘A’ range decreased to 17.9% (Q112: 18.4%).
Upgrades doubled in Q212 but in absolute terms, there were few such rating movements (16 in total). The bulk of upgrades occurred in the EM, notably Russia, Kazakhstan and emerging Americas.