Global Bank Ratings Continue Positive Trend in 1st Quarter of 2010, says Fitch Ratings

May 07, 2010: Fitch Ratings says global bank ratings extended their positive trend in Q110, with the number of positive rating actions further increasing to 90, from 68 in Q409, to represent more than 75% of rating actions. In contrast, negative rating actions halved to 29. Overall, rating activity fell slightly to 119 rating actions in Q110, compared with 126 in Q409.

In the latest quarterly report on bank rating trends, Fitch says the positive development 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 Q110. There are increasingly encouraging signs that the economic recovery will continue even with the expected decrease in government support. Nevertheless, Fitch notes that despite improvements throughout major advanced economies, the pressure on banks has only just started to ease, as banks' asset quality typically lags the underlying economic recovery.

In developed markets, the number of total rating actions fell to 33, from 49 in Q409. The proportion of negative rating actions increased slightly to 66.7% in Q110 (Q409: 59.2%). Fitch downgraded 12 and upgraded four banks. In developed Europe, Greek and Portuguese banks were affected by Negative Outlook changes. In Fitch's view, deteriorating public finances in these countries have increased banks' sensitivity to capital markets.

In emerging markets, the proportion of positive rating actions was near 92%, driven by the Russian Federation ('BBB'/Stable), where the banking sector performed better than expected during the global financial crisis. Following the upgrade of the Indonesian sovereign to 'BB+' from 'BB' in Q110, 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. These came as a consequence of the downgrade of the Greek sovereign ('BBB-'/Negative).

(Press release of Fitch Ratings)

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