The credit rating trend for global banks continued to deteriorate in the first half of 2016, according to a new report from New York-based Fitch Ratings Inc.
Global bank rating trends were negative in the first six months of the year, which represents the fourth consecutive negative six-month period, the Fitch report says. In fact, negative bank rating outlooks far outweighed positives in the first half by a margin not seen since 2009.
The majority of negative ratings are in emerging markets, Fitch reports, driven by rating actions in Brazil, Russia, Saudi Arabia and Nigeria. Bank downgrades in the emerging markets were largely triggered by sovereign downgrades, the report says.
Conversely, in developed markets, there were 16 rating upgrades in the first half, the Fitch report says, noting that this is the highest number of upgrades since before the global financial crisis. Of these, the credit rating agency reports that six banks in Sweden and the Netherlands were upgraded, and “an improved operating environment paved the way for upgrades in Slovenia.”
Still, negative rating outlooks outweigh positive outlooks in developed markets, Fitch reports, adding that banks facing asset quality problems could be downgraded over the next one to two years.
“This is the case for the Italian banks where ratings outlooks are mostly negative,” the report notes.
However, the gap between the negative and positive outlooks in developed markets is narrowing, the Fitch report notes: “[Developed market] banks have made significant progress in reducing legacy assets and strengthening capitalization and we expect those banks, which have successfully restructured operations, to see some upside rating potential.”