Global bank rating outlooks have turned sharply negative since the Covid-19 outbreak emerged, causing widespread economic disruptions.
In a new report, Fitch Ratings said that over 60% of bank rating outlooks were negative at the end of the first half of 2020, up from just 13% at the start of the year. There are now virtually no ratings with positive outlooks, it noted.
The Americas region has the highest proportion of negative outlooks at 87%, Fitch said, up from 31% before the pandemic.
European banks ranked second in negative outlooks.
“This reflects pre-crisis profitability challenges, which are likely to be exacerbated by the economic fallout from the pandemic,” Fitch said.
The balance is also more negative in developed markets (73%), compared with emerging markets, excluding Latin America (54%).
Emerging markets in the Asia-Pacific region as well as in Europe had the lowest proportions of negative outlooks, Fitch said, at 27% and 44%, respectively.
“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,” Fitch said.
Globally, there were 109 bank downgrades in the first half of 2020, compared with just nine upgrades, Fitch also reported.
“Downgrades were concentrated in emerging markets in the Americas (34), European developed markets (25) and the Middle East and Africa (21),” it said.