One in five bank ratings revised from negative to stable: Fitch Ratings

KUALA LUMPUR: One in every five rating actions that Fitch Ratings took on global financial institutions (FIs) in the first quarter (Q1) of 2021 led to a rating outlook revision from negative to stable, signalling near-term ratings risks are easing.

However, the credit rating agency said downside risks remained.

This included potential further coronavirus waves, weakened sovereign credit profiles and an economic fallout as governments gradually withdraw pandemic-related economic support.

“Of the 317 rating actions taken on global FIs between January 1 and March 21, 2021, 66 per cent led to unchanged ratings and outlooks, while 20 per cent led to outlook revisions to stable from negative,” Fitch Ratings said today.

The firm noted that only 11 per cent of rating actions were negative, evenly split between downgrades and outlook revisions to negative.

Fitch Ratings said banks had the highest proportion of negative rating actions in Q1, reflecting sovereign rating actions and weakening standalone credit profiles. “Non-bank financial institutions (NBFI) downgrades reflected a mix of downgrades of corporate parents, sovereigns, standalone credit weaknesses and merger and acquisition.”

Fitch Ratings said the proportion of global FI ratings on negative outlook or watch continued to decline but remained high by historical standards despite the mitigating macroeconomic effects of fiscal and monetary stimulus.

“This comprised of 54 per cent of bank ratings, 33 per cent of NBFI ratings and 24 per cent of insurance ratings on negative outlook or watch at end-Q1 of 2021.”

Fitch Ratings expects stabilisation trends over the rest of 2021 to vary by region due to contrasting speeds of economic recovery and different degrees of exposure to the sectors most affected by the pandemic.

“Several FI ratings are sensitive to the pressure that remains on some sovereign ratings, particularly in emerging markets, and on those corporate sectors and asset classes worst affected by the pandemic, such as leisure and hospitality,” it added.

Source: NST