Bank rating downgrades outpace upgrades in Q111 due to negative sovereign ratings- Fitch

May 20, 2011: Fitch Ratings says in a quarterly report that the number of global bank rating downgrades outpaced the number of upgrades in the first quarter of 2011, with 38 banks downgraded globally, mainly as a result of negative sovereign rating actions, and seven upgraded. In the new report, "Global Bank Rating Trends Q111: Downgrades Outpace Upgrades; Sovereign Ratings Drive Bank Ratings" available at, Fitch says that the number of downgrades remained relatively constant quarter-on-quarter at 38, compared with 36 downgrades in Q410, while the number of upgrades declined to seven from 25 in Q410.

The bank downgrades were primarily due to negative rating actions on peripheral European sovereigns, including Portugal ('A-'/Rating Watch Negative) Greece ('BB+'/ Negative) and Ireland ('BBB+'/ Negative), and on Middle Eastern sovereigns including Tunisia ('BBB-'/ Negative'), Bahrain ('BBB'/Rating Watch Negative), Egypt ('BB'/Rating Watch Negative) and Libya ('BB/Rating Watch Negative'). The Middle East actions were as a result of recent political unrest. These events generally affect the Issuer Default Ratings of banks domiciled in the same countries through the disruption of businesses and the reduced ability of the sovereigns to support the banks if needed.

Fitch expects the majority of global bank ratings to remain stable, as indicated by the fact that 74% of rated banks globally now have a Stable Outlook, while 9.6% have a Negative Outlook and 8.5% a Positive Outlook. A further 5.6% are on Rating Watch Negative. In total, Fitch took 77 negative rating actions (including rating downgrades, and the assignment of a Negative Outlook or placement on Rating Watch Negative) on banks in the quarter, compared with 73 in Q410. The number of positive rating actions declined to 34 from 62 in Q410.

(Source: Fitch Ratings )

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