Tuesday, January 28,2020  / 7:07  PM / Fitch Ratings / Header Image Credit: Fitch Ratings

Bank rating Outlooks are still skewed to the negative,although less so than six months ago, Fitch Ratings says. The global share ofNegative Outlooks was 13% at end-2019 and the share of Positive Outlooks 5%,compared with 17% and 6%, respectively, at end-1H19.

Emerging markets in the Americas have the highestshare of bank ratings on Negative Outlook (31%), mostly mirroring the NegativeOutlooks on several Latin American sovereigns. The Middle East and Africa hasthe next highest share (16%), driven by sovereign-related Negative Outlooks inSouth Africa and Nigeria, and Negative Outlooks on several Turkish banks,reflecting risks to credit profiles from the challenging operating environment.

In developed markets, most Negative Outlooks are dueto earnings pressure amid low interest rates, although several Italian banksare on Negative Outlook due to the sensitivity of their ratings to the Italiansovereign rating (BBB/Negative).

The Outlook balance benefited from the stabilisationof Outlooks on Turkish banks with ratings driven by state or institutionalsupport, following the stabilisation of the Turkish sovereign rating(BB-/Stable) in November 2019. It also benefited from the removal of the RatingWatch Negative on UK banks in December 2019, reflecting the reduced short-termrisk of a disruptive 'no-deal' Brexit. Another factor is the higher share ofbanks without an Outlook following widespread downgrades to the 'CCC' range andbelow in Argentina and Lebanon, as Outlooks are typically not assigned to banksrated at these levels.

There were 33 downgrades and 46 upgrades in 2H19.Downgrades were concentrated in Turkey (13) and Argentina (six), where theyfollowed sovereign rating actions. Russia and Ukraine accounted for 20 andseven upgrades, respectively, mostly driven by greater sovereign ability toprovide support or increased propensity of foreign owners to provide support,following sovereign upgrades.

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