Negative rating trend continues for the global banks

July 23, 2008: Fitch Ratings expects further negative rating actions on banks in the coming months, as the operating environment remains tough and the global economy continues to slow. There were more than twice as many negative rating actions taken during Q208 than positive actions, intensifying the negative trend already experienced in the previous two quarters.

In its latest quarterly report on "Global Bank Rating Trends", Fitch says the number of Positive Outlooks compared to Negative Outlooks assigned to bank ratings has steadily fallen over the past 15 months, with the number of Negative Outlooks surpassing that of Positive Outlooks at end-June 2008.

Although the immediate liquidity risks in the global banking system have been partly alleviated by measures taken by central banks, wider concerns about the extent to which global credit market conditions are likely to feed through to the real economies of developed countries intensified in Q208. "Banks in developed markets now face the prospect of increased credit costs on top of higher funding costs," says Gerry Rawcliffe, Managing Director and Group Credit Officer in Fitch's Financial Institutions Group. "Furthermore, Fitch does not rule out further write-downs of structured products, including write-downs related to financial guarantors."

During Q208 there were 69 negative rating actions on banks as opposed to 31 positive actions. Although there were still more positive actions in emerging markets than negative, there were significantly more negative actions than positive actions in developed markets. Rating downgrades during the quarter were predominantly in Europe, although there were some further downgrades in the developed Americas as well.

Having peaked in Q107 at five to one, at end-Q208 the number of Positive Outlooks was surpassed by the number of Negative Outlooks for the first time since the Global Bank Rating Trends report series began in 2006. The increase in Negative Outlooks largely related to banks in developed Europe and developed Americas. Despite this negative shift in Outlooks, around 80% of Fitch's bank ratings still have Stable Outlooks.

(This is press release of Fitch Ratings)



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