Fitch Ratings: Pace of Negative Rating Actions on Banks up in Q407
22.01.08 10:40
/Fitch Ratings, London/New York/Hong Kong, January 21, 08/ - Fitch
Ratings says the positive bias in bank ratings continued to be eroded in
Q407 as the number of negative rating actions accelerated. According to the
latest Fitch quarterly series of "Global Bank Rating Trends" reports, a
continuation of the current illiquid and volatile market conditions could
lead to further pockets of negative rating action in 2008.
"Higher funding costs are likely to exacerbate risk aversion and reduce
lending demand, while a slowdown in economic growth would undoubtedly
mean higher risk costs for banks," says Alison Le Bras, Managing Director in
Fitch's Financial Institutions Group. "Earnings and, in some cases, capital
are thus likely to come under pressure in 2008."
While the liquidity shock that first hit financial markets in August 2007
resulted in only a handful of negative rating actions in Q307, it marked a
turning point in bank rating trends. The negative movement intensified in
Q407 with the number of negative rating actions accelerating to 69 from 13,
the highest level since Fitch began the series of publications at the
beginning of 2006.
The turnaround was most marked in developed markets, where there were
19 outright downgrades during the quarter, the majority in the Americas and
Europe, where banks have been most affected by the ongoing global
financial turmoil. Outlooks on a number of ratings have also been revised
downward to reflect continuing vulnerability to aftershocks from the credit
crisis. As a result, the ratio of Positive to Negative Outlooks fell to 2:1 in
Q407 from 5:1 in Q107.
Of particular note are the negative rating actions taken on some of the large
US banks, such as Citigroup and Bank of America as well as investment
banks, Bear Stearns, Morgan Stanley and Merrill Lynch. In Europe, the main
casualty to date has been the Swiss banking giant, UBS AG.
While globally 78.3% of bank ratings still have a Stable Outlook, Fitch
expects rating deterioration to continue in 2008 and pockets of negative
rating actions are likely if the current volatile market conditions persist.
The report, entitled "Global Bank Rating Trends Q407" will be available soon
on Fitch's public website, www.fitchratings.com
Contacts:
Alison Le Bras, Paris, Tel: +33 1 44 29 91 46,
Gerry Rawcliffe, London, +44 20 7862 4019.
Media Relations:
Francoise Alos, Paris, Tel: +33 1 44 29 91 22;
Kenneth Reed, New York, Tel: +1 212-908-0540;
Shivani Sundralingam, Singapore, Tel: + 65 6796 7215;
Hannah Warrington, London, Tel: +44 (0) 207 417 6298.
[2008-01-22]