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Banks 

Special Report 
Global Bank Rating Trends Q210 
Downgrades Double; Positive Rating Actions Halve 

Analysts  Global Overview 
Gerry Rawcliffe Signs of stress re‐emerged in the financial sector in Q210 — especially in Europe —
+44 20 7682 4719 after it appeared to stabilise in earlier quarters. Fears over sovereign
gerry.rawcliffe@fitchratings.com
creditworthiness and a double‐dip recession grew even as the global economy
Thomas Abruzzo (North America) recovered further.
+1 212‐908‐0793
thomas.abruzzo@fitchratings.com Rating activity fell significantly, to 83 rating actions in Q210 from 119 in Q110. The
Bridget Gandy (EMEA)
number of positive actions more than halved to 41, or 49% of all rating actions from
+44 20 7417 4346 76% in Q110. Negative rating actions increased to 42 from 29 in Q110, significantly
bridget.gandy@fitchratings.com worsening the ratio of positive to negative rating actions to −1.0 (Q110: 3.1).
James Longsdon (EMEA)
+44 20 7417 4309 Sovereign‐related rating activities played an important role for bank ratings in
james.longsdon@fitchratings.com Q210: almost 40% of downgrades were in some way related either to the negative
Brett Hemsley (Asia)
rating actions taken on the Spanish and the Greek sovereigns or to asset quality and
+81 3 3288 2656 earnings challenges facing the banks due to the tough economic conditions in these
brett.hemsley@fitchratings.com countries. On 9 April, the Long‐Term Issuer Default Rating (IDR) of Greece was
Peter Shaw (Latin America)
further cut to ‘BBB−’/Negative Outlook from ‘BBB+’, leading to a downgrade of the
+1 212 908 0553 major Greek banks and a Negative Rating Watch being assigned. The ratings on
peter.shaw@fitchratings.com these banks have subsequently been affirmed with a Negative Outlook. Spain’s
Research sovereign rating was lowered to ‘AA+’ from ‘AAA’ with a Stable Outlook on 28 May.
Sebastian Angerer
sebastian.angerer@fitchratings.com  It is clear that the unprecedented scale of the macroeconomic stimulus provided
around the world prevented the recession from being even more severe. It
Related Research underpinned the recovery of both the global economy and trade in the second half
· Global Bank Rating Trends: A New Quarterly
of 2009, and continues to support growth. However, the fiscal costs of the crisis and
Publication (April 2006) recession have been even greater than expected and the creditworthiness of some
· Global Economic Outlook (April 2010)  sovereigns, such as Greece, Spain, Portugal, Italy and Ireland, has come under
greater scrutiny and market pressure sooner than anticipated.
Background  Fearing higher risk premiums, governments around the world started to introduce
This publication continues the series
dating from the beginning of 2006, measures to reduce their deficits in Q210. With a faster‐than‐expected withdrawal
and presents quarterly data up to and of this stimulus, the headwinds for the global economy are going to intensify, and
including Q210. Data prior to Q405 time will tell whether private investment and consumption are able to fill this gap.
are included in earlier publications.
Charts showing the distribution across With rising public debt levels, claims on governments have assumed greater
rating categories are also included
(Charts 5 and 6 below).
prominence on some bank balance sheets, notably in the euro zone. Volatility in
the value and credit profile of the issuers behind some of these claims links the
prospects of banks even more closely to sovereign entities.
Globally, most of Fitch’s bank ratings continued to have Stable Outlooks (72.7%) at
end‐Q210. The rest still mainly comprised Negative Outlooks (16.3%), with the
proportion of Positive Outlooks at a slightly improved 3.7%.
The global ratio of Negative to Positive Outlooks showed a further significant
improvement, to −4.4 at end‐Q210 from −11.2 at end‐Q110 (see Chart 1). In
developed markets, the ratio stood at −8.9 (end‐Q110: −11.9). Emerging markets
saw the biggest shift in Negative to Positive Outlooks, with an improvement to −2.0
from −12.8 at end‐Q110. In developed markets, this ratio varied from −2.3 in
developed Asia/Australasia to −23 in developed Europe. In emerging markets, the
ratio ranged from +3.4 in emerging Americas to −25.0 in emerging Europe. 

www.fitchratings.com  4 August 2010 


Banks
Chart 1: Global Rating Stock
Global Developed markets Emerging markets
(Ratio of Positive to Negative Outlooks)
10

‐10

‐30

‐50

‐70
Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210
Source: Fitch

Table 1: Global Banks: Outlooks on Long‐Term IDRs


Rating status Q210 (%) Q110 (%) Q409 (%) Q309 (%)
Stable Outlook 567 72.7 564 71.1 559 69.5 527 64.9
Positive Outlook 29 3.7 13 1.6 8 1.0 8 1.0
Negative Outlook 127 16.3 145 18.4 193 24.0 231 28.4
Evolving Outlook 1 0.1 1 0.1 2 0.2 1 0.1
Positive Watch 13 1.7 17 2.1 7 0.9 2 0.2
Negative Watch 29 3.7 33 4.2 32 4.0 37 4.6
Evolving Watch 14 1.8 19 2.4 3 0.4 6 0.7
Total 780 100.0 792 100.0 804 100.0 812 100.0
Source: Fitch 

· Ratio of Negative to Trends in Rating Outlooks and Watches: Developed 


Positive Outlooks Markets 
continued to improve Most developed market bank ratings in Q210 (66.1%) continued to have Stable
Outlooks. Both the proportion of Positive (2.5%) and Negative (22.2%) Outlooks
remained at similar levels. Positive Watches increased slightly to 2.0% (Q110: 1.0%)
and Negative Watches fell to 6.2% (Q110: 7.4%). The ratio of Negative to Positive
Outlooks improved to −9.2 at end‐Q210 (end‐Q110: −11.9).

Chart 2: Developed Market Rating Stock


Developed markets DM Americas DM Europe DM Asia/Australasia
(Ratio of Positive to Negative Outlooks)
30

10

‐10

‐30
Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210
Source: Fitch

Global Bank Rating Trends Q210


August 2010  2 
Banks
Table 2: Banks in Developed Markets: Outlooks on Long‐Term IDRs
Q210 (%) Q110 (%) Q409 (%) Q309 (%)
Rating status
Stable Outlook 265 66.1 267 65.6 279 67.1 268 64.4
Positive Outlook 10 2.5 8 2.0 6 1.4 6 1.4
Negative Outlook 89 22.2 95 23.3 96 23.1 111 26.7
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 8 2.0 4 1.0 6 1.4 2 0.5
Negative Watch 25 6.2 30 7.4 27 6.5 26 6.3
Evolving Watch 4 1.0 3 0.7 2 0.5 3 0.7
Total 401 100.0 407 100.0 416 100.0 416 100.0
DM Americas
Stable Outlook 66 61.1 66 60.0 67 59.8 66 58.4
Positive Outlook 4 3.7 4 3.6 4 3.6 4 3.5
Negative Outlook 34 31.5 36 32.7 37 33.0 37 32.7
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 2 1.9 0 0.0 0 0.0 0 0.0
Negative Watch 2 1.9 4 3.7 4 3.6 6 5.4
Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0
Total 108 100.0 110 100.0 112 100.0 113 100.0
DM Europe
Stable Outlook 157 66.0 158 65.3 167 67.3 161 64.9
Positive Outlook 2 0.8 2 0.8 2 0.8 2 0.8
Negative Outlook 46 19.3 50 20.7 48 19.4 60 24.2
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 6 2.5 4 1.7 6 2.4 2 0.8
Negative Watch 23 9.7 25 10.3 23 9.3 20 8.1
Evolving Watch 4 1.7 3 1.2 2 0.8 3 1.2
Total 238 100.0 242 100.0 248 100.0 248 100.0
DM Asia/Australasia
Stable Outlook 42 76.4 43 78.2 45 80.4 41 74.5
Positive Outlook 4 7.3 2 3.6 0 0.0 0 0.0
Negative Outlook 9 16.4 9 16.4 11 19.6 14 25.5
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 0 0.0 0 0.0 0 0.0 0 0.0
Negative Watch 0 0.0 1 1.8 0 0.0 0 0.0
Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0
Total 55 100.0 55 100.0 56 100.0 55 100.0
Source: Fitch

Americas
As in Q110, there was no meaningful improvement in the ratio of Positive to Negative
Outlooks in the developed Americas during Q210. Only four revisions in Outlooks took
place in Q210.
· The Outlook of Goldman Sachs Group, Inc. (‘A+’) was revised to Negative, based
on legal developments and regulatory changes that could harm its reputation
and revenue‐generating capacity.
· AmeriServ Financial, Inc.’s (‘BB’) Outlook was revised to Negative over
increasing concerns about the bank’s commercial real estate portfolio, which
makes up 55% of total loans.
· The Outlooks for Fifth Third Bancorp (‘A−’) and Capital One Financial
Corporation (‘A−’) were revised to Stable from Negative, due to moderating
credit trends and the prospect of consequently improving capital generation.
· Popular, Inc. (‘B’) and The South Financial Group, Inc. (‘CC’) were both put on
Positive Rating Watch. The South Financial Group reported a definitive
agreement regarding its acquisition by the Toronto‐based Dominion Group,
while Popular, Inc. finished a capital increase and the acquisition of Western
Bank Puerto Rico.
Despite a high 61.1% of issuers being assigned Stable Outlooks (Q110: 60.0%) in the
developed Americas, a significant proportion of ratings continued to be assigned
Negative Outlooks (31.5%). Positive Outlooks remained broadly stable at 3.7% and
the proportion of Negative Watches halved to 1.9%.

Global Bank Rating Trends Q210


August 2010  3 
Banks
Europe
In developed Europe, the proportion of ratings with Stable Outlooks increased very
slightly, to 66.0% at end‐Q210 from 65.3% at end‐Q110. At the same time, the
proportion of Negative Outlooks remained relatively stable at 19.3% (Q110: 20.7%).
At end‐Q210, almost two‐thirds of Negative Outlooks in developed Europe related
to banks in Italy, Spain and Portugal, reflecting economic challenges for these
countries. Fitch also has elevated funding concerns for certain issuers in these
markets. In Q210, 80% of all new or affirmed Negative Watches related to Greek
and Spanish banks.
Overall, the proportion of banks that were on Rating Watch Positive in developed
Europe at end‐Q210 increased slightly to 2.5%. The number of banks on Negative
Watches decreased to 23 at end‐Q210 from 25 at end‐Q110. This made up 9.5% of
all Outlooks and Watches. Evolving Watches increased slightly to 1.7% at end‐Q210.
There continued to be no Evolving Outlooks.
The main rating actions affecting Outlooks and watches in Q210 were as follows.

Italy
Banco Popolare (‘A−’) was put on Negative Outlook, after the Rating Watch
Negative was resolved. This rating action reflects the progress in working out some
of the bank’s largest impaired exposures and in strengthening its capital base.
However, the bank’s IDR remains on Negative Outlook because Fitch considers the
bank’s impaired loans, partly inherited from the acquisition of Banca Italease
(‘BBB+’/Negative Outlook), to remain high and capitalisation modest in relation to
these loans.

Spain
The Outlook for Caja de Ahorros de Asturias (Cajastur; ‘A’) was revised to Negative
from Stable, due to the high probability of Cajastur integrating the retail banking
business of Caja de Ahorros de Castilla La Mancha (CCM; ‘BB+’). This could give rise
to integration and execution risks due to CCM’s relatively large size and weak
financial position.
Banco Guipuzcoano (‘A−’) was put on Rating Watch Positive from Negative Outlook,
following the approval of its merger with Banco de Sabadell (‘A’).
Caixa d’Estalvis Laietana (‘BBB−’) and Caixa d’Estalvis de Girona (‘BBB’) were also
downgraded and put on Rating Watch Negative, reflecting concerns over asset
quality and earnings.

Ireland
Anglo Irish Bank Corporation Ltd (‘A−’) was placed on Rating Watch Evolving following
the proposal to split the bank into a new bank and a legacy asset company. The Rating
Watch is expected to be resolved once there is more clarity on this proposal.

Greece
In April, National Bank of Greece S.A. (‘BBB−’), Efg Eurobank Ergasias S.A. (‘BBB−’),
Alpha Bank (‘BBB−’), Piraeus Bank (‘BBB−’) and Agricultural Bank of Greece (‘BBB−’)
were put on Rating Watch Negative following a downgrade to the Greek sovereign
rating. These Rating Watches were subsequently resolved on 16 July 2010 (all of the
abovementioned Greek banks are now rated ‘BBB‐’/Negative Outlook) following the
implementation of the EU/IMF support framework, as well as liquidity support from
the ECB following the temporary amendments of ECB criteria regarding the
eligibility of collateral for Greek government debt and state‐guarantee issues.
T BANK S.A. (‘B’) was placed on Rating Watch Evolving from Rating Watch Negative
due to the bank’s share capital increase, which was largely subscribed by its new
major shareholder, TT Hellenic Postbank S.A.

Global Bank Rating Trends Q210


August 2010  4 
Banks
Germany
BHF‐BANK AG (‘A−’) has remained on Rating Watch Evolving since end‐Q110. BHF is
part of the Deutsche Bank Group, which is assessing future strategic goals that
might result in the sale of BHF. The Watch will be reviewed once there is more
clarity on the future ownership structure.

Asia/Australasia
The number of Negative Outlooks remained stable in developed Asia/Australasia in
Q210. Most ratings continued to be assigned Stable Outlooks (76.4%).
In Q210 the Outlooks of both Australia & New Zealand Banking Group (‘AA−’) and its
wholly owned subsidiary ANZ National Bank Limited (‘AA−’) were revised to Positive
due to the full acquisition of its wealth management operations. This acquisition
diversifies the group’s income streams and supports expansion plans in Asia.
Japan‐based Shinsei Bank, Ltd’s Issuer Default Rating was downgraded to ‘BB+’
from ‘BBB’ and the Outlook was set to Stable from Rating Watch Negative. This
rating action reflects a significant 15% depletion of the bank’s Tier 1 capital over
the fiscal year to end‐March 2010. Out of the nine banks that were on Negative
Outlook at end‐Q210, seven were based in Japan. This reflects the continuously
difficult operating environment for the Japanese banking sector, despite some
marginal improvement at the end of the 2010 fiscal year. 

· Ratio of Negative to Trends in Rating Outlooks and Watches: Emerging 


Positive Outlooks Markets 
continued to improve

Chart 3: Emerging Market Rating Stock


Emerging markets EM Americas EM Central and Eastern Europe
EM Asia EM Middle East and Africa
(Ratio of Positive to Negative Outlooks)
40
20
0
‐20
‐40
‐60
‐80
‐100
Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210
Source: Fitch

The ratio of Negative to Positive Outlooks in emerging markets improved markedly


again in Q210. This was significantly affected by the Outlook change of the Brazil
sovereign from Positive from Stable, which led to 12 Brazilian banks also being put
on Positive Outlook. At −2.0, the ratio of Positive to Negative Outlooks reached a
level last seen in Q106 and improved significantly compared with its all‐time low in
Q309, when it fell to a value of −60.0. This positive global development in the ratio
was also supported by both emerging Europe and Asia.
In emerging America, the ratio turned to +3.4 at end‐Q210 from −1.5 at end‐Q110.
This makes emerging America the only region among both developed and emerging
markets that shows a positive ratio of Negative to Positive Outlooks.
A positive contribution for the ratio also came from emerging Europe. Despite still
being the market worst affected by the financial crisis, the ratio further improved
to −25.0, compared with the all‐time‐low of −88.0 in Q309. The proportion of banks
with Stable Outlooks increased to 79.7% at end‐Q210 from 77.1% at end‐Q110.

Global Bank Rating Trends Q210


August 2010  5 
Banks
Table 3: Banks in Emerging Markets: Outlooks on Long‐Term IDRs
Q210 (%) Q110 (%) Q409 (%) Q309 (%)
Rating status
Stable Outlook 302 79.7 297 77.1 280 72.2 259 65.4
Positive Outlook 19 5.0 4 1.0 2 0.5 2 0.5
Negative Outlook 38 10.0 51 13.2 97 25.0 120 30.3
Evolving Outlook 1 0.3 1 0.3 2 0.5 1 0.3
Positive Watch 5 1.3 13 3.4 1 0.3 0 0.0
Negative Watch 4 1.1 3 0.8 5 1.3 11 2.8
Evolving Watch 10 2.6 16 4.2 1 0.2 3 0.8
Total 379 100.0 385 100.0 388 100.0 396 100.0
EM Asia
Stable Outlook 84 92.3 85 94.5 88 95.7 81 87.0
Positive Outlook 1 1.1 0 0.0 0 0.0 0 0.0
Negative Outlook 4 4.4 4 4.4 4 4.3 10 10.8
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 1 1.1 1 1.1 0 0.0 0 0.0
Negative Watch 1 1.1 0 0.0 0 0.0 0 0.0
Evolving Watch 0 0.0 0 0.0 0 0.0 2 2.2
Total 91 100.0 90 100.0 92 100.0 93 100.0
EM Americas
Stable Outlook 49 69.0 62 84.9 58 80.6 51 72.9
Positive Outlook 17 23.9 4 5.5 2 2.8 2 2.9
Negative Outlook 5 7.1 6 8.2 10 13.9 16 22.9
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0
Positive Watch 0 0.0 0 0.0 0 0.0 0 0
Negative Watch 0 0.0 1 1.4 2 2.7 1 1.3
Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0
Total 71 100.0 73 100.0 72 100.0 70 100.0
EM Europe
Stable Outlook 92 67.7 73 52.5 57 40.5 49 33.3
Positive Outlook 1 0.7 0 0.0 0 0.0 0 0
Negative Outlook 25 18.3 36 25.9 77 54.6 88 59.9
Evolving Outlook 1 0.7 1 0.7 2 1.4 1 0.7
Positive Watch 4 2.9 12 8.7 1 0.7 0 0.0
Negative Watch 3 2.2 1 0.7 3 2.1 9 6.1
Evolving Watch 10 7.4 16 11.5 1 0.7 0 0.0
Total 136 100.0 139 100.0 141 100.0 147 100.0
EM Middle East and Africa
Stable Outlook 77 95.0 77 92.8 77 92.8 78 90.6
Positive Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Negative Outlook 4 5.0 5 6.0 6 7.2 6 7.1
Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0
Positive Watch 0 0.0 0 0.0 0 0.0 0 0.0
Negative Watch 0 0.0 1 1.2 0 0.0 1 1.2
Evolving Watch 0 0.0 0 0.0 0 0.0 1 1.1
Total 81 100.0 83 100.0 83 100.0 86 100.0
Source: Fitch

Europe
The ratio of Negative to Positive Outlooks improved to −25.0 at end‐Q210 from −36.0 at
end‐Q110. This improvement was driven by the Outlook change of the Ukrainian
sovereign, which was revised to Stable from Negative, leading to the Outlooks of nine
Ukrainian banks being changed to Stable from Negative. Eight Ukrainian banks were
upgraded in Q310, together with the sovereign.
Within the region, a further significant proportion of changes related to banks from
the Russian Federation. At end‐Q210, all banks that were assigned a Positive or
Evolving Outlook or Watch were based in the Russian Federation. This is primarily
the result of a number of the Evolving and Positive Rating Watches that were
placed on 15 and 13 Russian banks, respectively, in Q110.
The resolution of some of these Watches resulted in upgrades in Q210 (see below,
Rating Actions), while Promsvyazbank (‘B+’) was affirmed and assigned a Positive
Outlook, which reflects Fitch’s expectation that the bank’s asset quality will
stabilise and capitalisation will strengthen. Most of the Watches remaining on
Russian banks at end‐Q210 have been resolved in Q310.

Global Bank Rating Trends Q210


August 2010  6 
Banks
Most Negative Watches can be attributed to the downgrading of the subsidiaries of
Greek banks. United Bulgarian Bank (‘BB+’) and Eurobank EFG Bulgaria AD (‘BB+’)
were put on Rating Watch Negative. In Romania, the same happened to Banca
Romaneasca S.A. (‘BB+’).
In Q210, the proportion of Stable Outlooks continued to rise and reached 67.7% at
end‐Q210. This increase was driven by the resolution of the Watches of Russian
banks, of which most were assigned Stable Outlooks in Q210. Compared with Q309,
this means that Stable Outlooks have almost doubled.

Asia
In emerging Asia, the proportion of Stable Outlooks remained high, despite a slight
decrease to 92.3% from 94.5%. The number of ratings with a Negative Outlook was
four (or 4.4% of ratings at end‐Q110), the same level for the third consecutive
quarter.
Notable rating actions included the following.

Taiwan
Three of the four Negative Outlooks in emerging Asia remained assigned to
Taiwanese banks: Bank SinoPac (‘BBB+’), Far Eastern International Bank (‘BBB−’)
and Taichung Commercial Bank (‘BB+’). Fitch expects the banking sector in Taiwan
to report better earnings in 2010, although substantial fears do remain regarding
mortgage quality due to an increase in property prices since their trough in Q203.
Waterland Financial Holdings (‘BBB−’) and its subsidiaries were put on Rating Watch
Negative, reflecting Fitch’s view that the acquisition of the Taiwan operations of US
life insurer MetLife Inc. will strain Waterland Financial Holding’s capital strength.
There continued to be no banks on Evolving Outlooks or Watches at end‐Q210.

Malaysia
CIMB Bank Berhad (‘BBB+’) was put on Positive Outlook during the quarter. The
Positive Outlook recognises the bank’s improved financial profile, which remained
resilient during the downturn.

Thailand
Siam City Bank Public Company Limited (‘BB’) remained on Rating Watch Positive.
This follows the announcement of the bank’s planned acquisition by Thanachart
Bank Public Company Limited. The acquisition will make Thanachart Bank Public
Company Limited the fifth‐largest banking group in Thailand, increasing its systemic
importance. The acquisition should also improve the bank’s capital and funding
profile as well as its financial performance.

Americas
In the emerging Americas, the proportion of Stable Outlooks decreased markedly to
69.0% at end‐Q210 from 84.9% at end‐Q110. The number of banks on Positive
Outlook more than quadrupled to 17, which represented 24.9% of Outlooks and
Watches. This lifted the ratio of Negative to Positive Outlooks to +3.4 — the only
positive figure among all regions.
As noted above, the jump in Positive Rating Outlooks can be attributed to the
change in the Outlook for the Brazilian sovereign, which was revised to Positive.
The Outlook revision reflects Brazil’s better‐than‐expected resilience and economic
performance in the face of the global recession, which together with its relatively
prudent economic policies should allow the country’s per capita income and fiscal
solvency ratios to improve steadily during the forecast period. The banking sector is
expected to benefit from this development.

Global Bank Rating Trends Q210


August 2010  7 
Banks
The proportion of ratings with a Negative Outlook declined slightly to 7.1%. Most of
these Outlooks continue to relate to banks from El Salvador. The potential for these
banks’ rating Outlooks to be revised to Stable is contingent on the level and timing
at which the sovereign rating stabilises.
At end‐Q210, there were no banks on either Rating Watch or Evolving Outlooks in
the region.
Middle East and Africa
In Q210, the Middle East and Africa saw Stable Outlooks maintained at a very high
level of 95.0%. There were four Negative Outlooks.
Two banks from South Africa remained on Negative Outlook: Absa Bank Limited
(‘A’) and FirstRand Bank Limited (‘BBB+’). The Negative Outlooks reflect the
continuing downward pressure on South Africa’s Country Ceiling since the revision
of the Outlook of the South African sovereign rating.
In Q210, UAE‐based Dubai Bank (‘BBB−’) and Bahrain‐based TAIB Bank BSC (‘B+’)
were assigned Negative Outlooks. The revision of the banks’ Outlooks is a result of
uncertain strategies, weakened financials and low profit expectations for 2010. 

· Ratio of positive to Rating Actions 


negative rating actions The number of rating actions decreased markedly to 83 in Q210 from 119 in Q110.
turned negative after two Globally, the total of positive actions more than halved to 41 — with significantly
consecutive positive fewer Positive Watches and Positive Outlook Changes driving this development. At
quarters the same time, total negative actions increased by 45% to 42, led by a sharp rise in
· Sovereign rating actions on downgrades. While in Q110 rating downgrades accounted for only 13.5% of all rating
Greece and Spain drivers actions, the proportion rose to 39.8% in Q210.
behind development Developed Markets
In developed markets, total rating actions increased significantly: to 40 in Q210. Only
one‐fifth of total rating actions were positive. There were no upgrades and 80% of total
rating actions were negative. Consequently the ratio of positive to negative rating
actions deteriorated to −4.0 from −2.0 in Q110. In Q210, downgrades in the developed
markets doubled to 25, making up 62.5% of all rating actions.
Out of the 25 developed market downgrades, 22 related to developed Europe, with
Greek and Spanish banks accounting for almost 60% of these actions. This
development reflected the sovereign rating actions and growing concerns over the
financial soundness of the Greek and Spanish economies, and their implications for
the domestic banks.
In France, BNP Paribas was downgraded to ‘AA−’/Stable Outlook from ‘AA’, over
concerns regarding its business mix, which continues to show a relatively high
contribution from corporate and investment banking, and further asset quality
deterioration in 2009. Consequently BNP’s subsidiaries, Belgium‐based Fortis Bank
and US‐based BancWest Corporation, were downgraded to ‘A+’ from ‘AA−’.
Emerging Markets
Rating actions in emerging markets halved to 43 in Q210. While rating upgrades
remained broadly stable, there were sharp decreases in changes to Positive
Watches and Outlooks. At the same time, total negative rating actions increased
only slightly in Q210. Driven by the significant drop in positive rating actions, the
ratio of positive to negative rating actions deteriorated markedly but remained
positive at +3.3.
In emerging markets, rating downgrades doubled to eight in Q210, which made up
18.6% of all rating actions. About 60% of downgrades related to emerging Europe,
where the subsidiaries of Greek banks (Eurobank EFG Bulgaria AD, Banca
Romaneasca S.A. and United Bulgarian Bank) were downgraded to ‘BB+’ from
‘BBB−’, following the negative rating action on the Greek sovereign.

Global Bank Rating Trends Q210


August 2010  8 
Banks
In Russia, International Industrial Bank was downgraded twice — from ‘B’ to ‘CCC’,
and then to ‘C’ — reflecting the bank’s stressed liquidity position (in Q310 the bank
was downgraded to ‘RD’ following default on an outstanding Eurobond).
In Q210, many of the Positive and Evolving Watches relating to banks from the
Russian Federation were resolved. This resulted in nine Russian banks being
upgraded, including OJSC Alfa‐Bank and MDM Bank to ‘BB’ and NOMOS‐BANK to
‘BB−’. The upgrades reflected the banks’ reasonable capital positions, the generally
better‐than‐expected performance of the Russian banking sector during the crisis,
and the fact that certain aspects of Russia’s banking system infrastructure have
improved, most notably in respect of banks ability to access liquidity.
Bank Audi S.A.L. and Byblos Bank S.A.L. were both upgraded to ‘B’ from ‘B−’,
following the upgrade of the Lebanese sovereign to ‘B’. Lebanon’s banking system
is one of the country's main strengths. Liquid and consistently profitable, the
Lebanese banks have withstood the effects of the global credit crunch and the
international economic challenges as well as the recent political unrest.

Chart 4: Global Rating Flow


Global Developed markets Emerging markets
(Ratio of positive to negative actions)
60
40
20
0
‐20
‐40
‐60
‐80
Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210
Source: Fitch

Chart 5: Developed Market Rating Stock


(End‐Q210 rating distribution)
(%)
60

40

20

0
'AAA' 'AA' 'A' 'BBB' 'BB' 'B' 'CCC' 'CC' 'C' 'D'

Source: Fitch

Chart 6: Emerging Market Rating Stock


(End‐Q210 rating distribution)
(%)

60

40

20

0
'AAA' 'AA' 'A' 'BBB' 'BB' 'B' 'CCC'

Source: Fitch

Global Bank Rating Trends Q210


August 2010  9 
Banks
Table 4: Quarterly Movements
Q210 (%) Q110 (%) Q409 (%) Q309 (%)
Rating action
Global
Rating upgrade 14 16.87 17 14.29 19 15.08 7 7.78
Positive Watch 4 4.82 27 22.69 21 16.67 0 0.00
Positive Outlook change 23 27.71 46 38.66 28 22.22 15 16.67
Total positive actions 41 49.40 90 75.63 68 53.97 22 24.44

Rating downgrade 33 39.76 16 13.45 44 34.92 41 45.56


Negative Watch 4 4.82 5 4.20 5 3.97 8 8.89
Negative Outlook change 5 6.02 8 6.72 9 7.14 19 21.11
Total negative actions 42 50.60 29 24.37 58 46.03 68 75.56
Total rating actions 83 100.00 119 100.00 126 100.00 90 100.00
Ratio of positive to negative actions ‐1.0 3.1 1.2 ‐3.1

Developed markets
Rating upgrade 0 0.00 4 12.12 2 4.08 1 2.27
Positive Watch 4 10.00 0 0.00 5 10.20 0 0.00
Positive Outlook change 4 10.00 7 21.21 13 26.54 0 0.00
Total positive actions 8 20.00 11 33.33 20 40.82 1 2.27

Rating downgrade 25 62.50 12 36.36 19 38.78 28 63.64


Negative Watch 2 5.00 4 12.12 3 6.12 7 15.91
Negative Outlook change 5 12.50 6 18.18 7 14.29 8 18.18
Total negative actions 32 80.00 22 66.67 29 59.18 43 97.73
Total rating actions 40 100.00 33 100.00 49 100.00 44 100.00
Ratio of positive to negative actions ‐4.0 ‐2.0 ‐1.5 ‐43.0

Emerging markets
Rating upgrade 14 32.56 13 15.12 17 22.08 6 13.04
Positive Watch 0 0.00 27 31.40 16 20.78 0 0.00
Positive Outlook change 19 44.19 39 45.35 15 19.48 15 32.61
Total positive actions 33 76.74 79 91.86 48 62.34 21 45.65

Rating downgrade 8 18.60 4 4.65 25 32.47 13 28.26


Negative Watch 2 4.65 1 1.16 2 2.60 1 2.17
Negative Outlook change 0 0.00 2 2.33 2 2.60 11 23.91
Total negative actions 10 23.26 7 8.14 29 37.66 25 54.35
Total rating actions 43 100.00 86 100.00 77 100.00 46 100.00
Ratio of positive to negative actions 3.3 11 1.7 ‐1.2
Source: Fitch

Global Bank Rating Trends Q210


August 2010  10 
Banks

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Global Bank Rating Trends Q210


August 2010  11 

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