The number of global bank rating downgrades increased in the fourth quarter, driven primarily by the eurozone crisis, Fitch Ratings said today in a new report.
The rating agency said Monday that there were 103 downgrades in the fourth quarter, up from 30 in the previous quarter. And, the number of rating upgrades remained relatively unchanged at 16. “The rise in downgrades was mainly driven by the impact of the worsened eurozone crisis and the agency’s review of its ratings of the world’s largest banks,” it says.
Looking ahead, global bank ratings are expected to deteriorate further, Fitch says, as it has 2.2 negative outlooks for each positive outlook at the end-Q4, up from a ratio of 1.1:1 at the end of Q3. It notes that the poor outlook is especially stark for banks in developed markets, which had 5.4 negative outlooks for every positive outlook, largely due to eurozone crisis. In contrast, emerging market bank ratings had 1.2 positive outlooks for every negative outlook.
Moves to lower sovereign ratings were a major driver of bank rating actions during the quarter, Fitch adds. Negative actions were taken on several eurozone banks, especially in Italy and Spain, following similar actions on their respective sovereigns’ ratings.
Separately, Standard & Poor’s Ratings Services said Monday that it has lowered its ratings on 15 Spain-based financial institutions and revised the outlook of one firm to negative from stable, following the lowering of Spain’s sovereign credit ratings.
Fitch’s report also says that the number of bank ratings on rating watch negative more than doubled to 77 at the end of the year, from 34 at the end of the previous quarter, mainly concentrated in developed and emerging Europe.