Professional Documents
Culture Documents
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.
‐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
10
‐10
‐30
Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210
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%.
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.
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.
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.
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.
40
20
0
'AAA' 'AA' 'A' 'BBB' 'BB' 'B' 'CCC' 'CC' 'C' 'D'
Source: Fitch
60
40
20
0
'AAA' 'AA' 'A' 'BBB' 'BB' 'B' 'CCC'
Source: Fitch
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
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
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ
THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND
THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT
WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM
THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST,
AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO
AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.
Copyright © 2010 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004.Telephone: 1‐800‐753‐4824,
(212) 908‐0500. Fax: (212) 480‐4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights
reserved. In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from
other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in
accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent
such sources are available for a given security or in a given jurisdiction. Users of Fitch’s ratings should understand that neither an
enhanced factual investigation nor any third‐party verification can ensure that all of the information Fitch relies on in connection with a
rating will be accurate and complete. Further, ratings are inherently forward‐looking and embody assumptions and predictions about
future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings can be affected
by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this report is
provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security.
The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not
engaged in the offer or sale of any security. A report providing a Fitch rating is neither a prospectus nor a substitute for the information
assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be
changed, suspended, or withdrawn at anytime for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of
any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price,
the suitability of any security for a particular investor, or the tax‐exempt nature or taxability of payments made in respect to any security.
Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from
US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued
by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to
vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by
Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the
United States securities laws, the Financial Services and Markets Act of 2000 of Great Britain, or the securities laws of any particular
jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic
subscribers up to three days earlier than to print subscribers.