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The COVID-19 pandemic has turned the balance of outlooks of banks worldwide into sharply negative, a report by Fitch Ratings showed.
According to the ratings agency, the proportion of bank ratings on negative outlook or on rating watch negative (RWN) increased to over 60 percent at the end of the first half of the current year, from 13 percent at the end of 2019.
The report said that the proportion on RWN was 10 percent, the highest in recent years, reflecting near-term risks to many banks’ ratings. There were also no ratings on positive outlook or rating watch positive.
“The Outlook balance was most Negative in emerging markets in the Americas, with 87% of ratings on Negative Outlook or RWN, reflecting the already high proportion of Negative Outlooks at end-2019 (31%), and rating actions in 1H20 to reflect deteriorating operating environments and sovereign rating actions,” the report said.
European developed markets had the second-highest proportion of negative outlooks or RWN and the greatest increase in the first half of 2020.
Banks with the lowest proportion of negative outlook/watch were in Emerging markets in Asia-Pacific (27 percent) and Europe (44 percent).
“This reflects the greater prevalence of ratings driven by external support - mostly sovereign support in the case of Asia-Pacific banks and institutional support from higher-rated parents in the case of European emerging market banks,” the report said.
Fitch has also downgraded 109 banks globally and upgraded nine banks in the first half of 2020.
Most downgraded were in the Americas (34), European developed markets (25) and the Middle East and Africa (21).
(Reporting by Gerard Aoun; editing by Seban Scaria)
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