Global banks continued to see positive rating action in the first quarter, with emerging markets leading the way, Fitch Ratings reported on Friday.

In the quarter, positive rating actions further increased to 90, from 68 in the previous quarter, and, at the same time, negative rating actions halved to 29, Fitch reported. This positive swing was driven by emerging markets and can be attributed to an overall upward economic trend that started in mid-2009 and continued to stabilize through the first quarter of this year, Fitch explained.

In the advanced economies, Fitch says that the pressure on banks has only just started to ease, “as banks’ asset quality typically lags the underlying economic recovery”.

In developed markets, the proportion of negative rating actions increased slightly to 66.7% in the first quarter, up from 59.2% in the previous period. Fitch downgraded 12 and upgraded four banks. In Europe, Greek and Portuguese banks were affected by negative outlook changes, as Fitch says deteriorating public finances in these countries have increased banks’ sensitivity to capital markets.

In emerging markets, positive rating actions were driven by Russia, where the banking sector performed better than expected during the global financial crisis; and, following the upgrade of the Indonesian sovereign, eight Indonesian banks were upgraded, accounting for the majority of upgrades in emerging markets. The downgrades in emerging markets can be mainly attributed to Greek banks’ subsidiaries.

IE