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Credit rating upgrades for global financial institutions overwhelmingly outnumbered downgrades in the third quarter, Fitch Ratings says.

The rating agency reported that there were 49 upgrades in the third quarter, compared with just 10 downgrades.

The robust upgrade activity was largely driven by stronger capitalization and profitability improvements, alongside positive sovereign rating activity that boosted both banks and non-bank financial institutions, Fitch said.

Sovereign linkages accounted for almost half of all rating changes, with positive changes concentrated in Brazil and Turkey, and negative changes in Ecuador, Kenya and the U.S., it said.

For banks and insurers, most of the positive rating action that wasn’t connected to sovereign ratings were driven by higher interest rates boosting firms’ profits and capital positions.

“Several positive actions also reflected asset quality improvement and lower risk appetites, notably in western Europe,” Fitch said.

For non-banks, such as brokerage firms and asset managers, most of the positive rating actions were due to declining leverage, business profile improvements and shareholder support.

At the end of the quarter, 84% of global financial institutions’ ratings were stable, Fitch said, adding that positive and negative rating outlooks were balanced for the first time since the beginning of the pandemic.