Banks in the Middle East and Africa saw stable outlooks at a very high level of 92.8 per cent at the end of the first quarter, a latest report on Global Banking Trends Q1 2010 by Fitch Ratings said.
Negative rating actions for banks globally halved in the first quarter and the proportion of positive ratings increased to 76 per cent in the quarter compared to 54 per cent in the last quarter of 2009, the rating agency said.
Most of Fitch’s bank ratings globally continued to have Stable outlooks (for 71.1 per cent) at the end of first quarter. Even as rating activity fell slightly in Q1, the ratio of negative to positive outlooks recorded a significant improvement, the rating agency said.
Banks in the Middle East and Africa witnessed high-level stable outlooks with 77 of the 83 banks showing stable outlook on long-term IDRs with five in the negative.
According to the report, the last quarter saw 126 rating actions of which 54 per cent were positive. “Evidence began to emerge in mid-2009 that global economic recovery was gaining momentum,” Fitch said.
The positive development is driven by emerging markets, it said. There are increasingly encouraging signs that the economic recovery will continue even with the expected decrease in government support, the report said. “Nevertheless, Fitch notes that despite improvements throughout major advanced eco-nomies, the pressure on banks has only just started to ease, as banks’ asset quality typically lags the underlying economic recovery,” it added.
In the first quarter, number of positive rating actions increased to 90 from 68 in Q4 of 2009, to represent more than 75 per cent of rating actions. In contrast, negative rating actions halved to 29. Overall, rating activity fell slightly to 119 rating actions in the first quarter this year, compared with 126 in the last quarter of 2009.
While globally, the ratio of negative to positive outlooks improved significantly to (-)11.2 at the end of first quarter from (-)24.1 at the end of last quarter of 2009, in case of the developed markets this ratio was (-)11.9 compared to (-)16.
In developed markets, the number of total rating actions fell to 33, from 49. The proportion of negative rating actions increased slightly to 66.7 per cent in the first quarter from 59.2 in the previous quarter.
Fitch downgraded 12 and upgraded four banks. In developed Europe, Greek and Portuguese banks were affected by negative changes. The rating agency said deteriorating public finances in these countries have increased banks’ sensitivity to capital markets.
In emerging markets, the proportion of positive rating actions was near 92 per cent driven by the Russian Federation, where the banking sector performed better-than-expected during the global financial crisis.
Following the upgrade of the Indonesian sovereign to ‘BB+’ from ‘BB’ in the first quarter, eight Indonesian banks were upgraded, accounting for the majority of upgrades in emerging markets.
The downgrades in emerging markets can be mainly attributed to Greek banks’ subsidiaries. These came as a consequence of the downgrade of the Greek sovereign, said Fitch.