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REUTERS BREAKINGVIEWS

"Worrying Smoke Signals Emerging From Turkey"

The country’s fifth-largest lender by assets, Akbank, has launched a deeply discounted rights issue to shore up its balance sheet, according to Reuters BreakingViews.

Experience Credit Outlooks 2019

Our annual Credit Outlooks are now available. We're producing reports, video, webinars, and commentary across all sectors and regions to give you in-depth insight into credit in 2019 and beyond.

2019 Outlook

Asia-Pacific Banks Running up Against Headwinds

Trade tensions, rising interest rates and slower economic growth in China remain key factors that could test banks' asset quality, while rising regulatory, compliance and accounting requirements could exert pressure on costs and challenge strategies in a number of markets. 

3Q18 Bank Earnings: Stronger Bottom Line on Revenue Growth

Chris Wolfe, managing director and head of US Banks, discusses factors strengthening US banks bottom lines in the third quarter 2018.

China D-SIFI List Underlines Commitment to Contain Financial Risk

The Chinese authorities' plan to designate at least 30 banks, 10 securities firms and 10 insurance companies as domestic systemically important financial institutions (D-SIFIs) suggests continuing commitment to broadening and strengthening regulatory supervision across the financial sector.

EU Bail-in Rule Exposes Medium-Sized Banks' Senior Creditors

The provisional agreement on minimum levels of bail-inable subordinated debt in the EU's Bank Recovery and Resolution Directive (BRRD) may leave senior creditors of medium-sized banks more exposed if those banks fail. This could include, in extremis, wholesale depositors. 

Tunisia 2019 Banking Outlook Negative on Tight Liquidity

The sector outlook for Tunisia's banks in 2019 is negative, reflecting the prospect of continued tight liquidity, rising funding costs and weak economic activity, Fitch Ratings says in an Outlook Report on banking in francophone African countries.

Bank Fines Rising for Violating Sanctions, AML and ATF Rules

US authorities have levied the largest fines, mostly against European banks for violations of US sanctions. Rising geopolitical tensions are likely to lead to more sanctions from the US and elsewhere, which could result in more violations and more fines.

Webcast

Global Bank Regulation Review

Listen to Monsur Hussain, Fitch’s Head of Financial Institutions Research - Regulatory Policy, together with Alan Adkins, Head of Financial Institutions Central Functions and Research Group as they discuss the latest developments in prudential regulation, what is the Basel Committee doing, and the status of resolution regimes.

Turkish Banks' 3Q Results Confirm Declining Asset Quality

Turkish banks' 3Q18 results confirm that asset quality is gradually deteriorating as a result of the economic slowdown, lira depreciation and interest rate rises. Results under IFRS 9, available at end-2018, should add to the picture and may show more significant deterioration. Signs of pressure on foreign-currency borrowers from the depreciation of the Turkish lira in the summer could become more evident next year.

Canadian Banks More Sensitive to Rate Hikes

Canadian banks' higher reliance on interest-bearing deposits and wholesale funding make them more susceptible to future interest rate hikes, which will be pivotal heading into next year, according to Fitch Ratings in its Chart of the Month.

Asia-Pacific Banks' Overseas Growth Faces Challenges

Banks across most of the Asia-Pacific's developed economies have expanded into the region's emerging markets over the past decade to boost profitability and offset low domestic returns. This exposure is potentially higher risk than the banks' domestic business and could be tested as trade tensions, global monetary tightening and China's economic slowdown weigh on the operating environment in many of these markets.

China's Stability Report Shows Bank Capital, TLAC Challenges

The People's Bank of China's (PBOC) 2018 Financial Stability Report underlined that capital positions across much of the banking sector would be vulnerable under stress, which reinforces our view that bank capital would act as a significant constraint against more aggressive policy easing.

Fitch Ratings Marks APAC Milestone with China Onshore Rating Agency

Fitch Ratings has expanded its Asia-Pacific operations with the official office opening today of Fitch (China) Bohua Credit Ratings Ltd. Established in Beijing, the domestic rating agency plans to service China's onshore bond market, complementing Fitch Ratings' international ratings business.

Headwinds to Foreign Banks' Chinese Lending Rising

Foreign banks' mainland China exposure (MCE) exceeded USD2 trillion for the first time in 1H18, although its growth slowed from a very strong 2017. Rising headwinds from the US-China trade war and a weaker outlook for the Chinese economy suggest a temporary dip is possible in 2H18 and 2019, but we expect structural factors to drive continued growth in MCE - and its associated risks - over the medium term, Fitch Ratings says.

Consolidation to Continue in Japan's Banking System

Fitch Ratings reiterates in an update given to investors that the agency expects consolidation of Japan's regional banks will continue slowly. These banks continue to face pressure on profit from limited non-interest revenue sources and geographical diversification, and a challenge to generate sustainable profit, which is one of the reasons to consider consolidation for future success. 

Australian Banks' Earning Pressure to Continue in 2019

The earnings of Australia's four major banks are likely to fall further in the near term due to slowing credit growth, especially in the residential mortgage segment, and further remediation and compliance costs associated with inquiries into the financial sector, including the Royal Commission.

Fed Proposal Expands GSIB, Regional Bank Regulatory Gap

Recently proposed changes to how regulatory capital and liquidity is managed and reported at US large regional banks continues the bifurcation of regulatory relief between Global Systemically Important Banks (GSIBs) and smaller peers.

Fitch on Emerging Market Banks

Fitch recently held a webcast on the outlook for financial institutions across Emerging Markets. Register and listen to this webcast on-demand.

Fed Proposal Expands GSIB, Regional Bank Regulatory Gap

Recently proposed changes to how regulatory capital and liquidity is managed and reported at US large regional banks continues the bifurcation of regulatory relief between Global Systemically Important Banks (GSIBs) and smaller peers.

USMCA Mitigates Risk for Mexico’s Financial Institutions

The tentative new US-Mexico-Canada Agreement, which updates NAFTA, should reduce broad macro and financial uncertainties related to trade protectionism for Mexican banks.

Fitch Ratings Launches China Local Ratings Agency with Danny Chen as CEO

Fitch Ratings announced the launch of Fitch (China) Bohua Credit Ratings Ltd. (Fitch Bohua) which plans to serve China's onshore bond market, and has appointed Danny Chen as Fitch Bohua's chief executive officer. Set up in July 2018 in Beijing, Fitch Bohua is a 100% subsidiary of Fitch Ratings. The company is seeking regulatory approval to cover the financial institutions sector (including banks, non-bank financial institutions and insurers) as well as the structured finance sector in its initial phase of operations.

Bloomberg

Fitch's Bauer Discusses HSBC From Ratings Perspective

Sabine Bauer, Senior Director of APAC Financial Institutions at Fitch Ratings, and Nisha Gopalan, a Bloomberg Opinion columnist, talk about HSBC Holdings on back of results announcement.  Bauer and Gopalan speak with Yvonne Man and Rishaad Salamat on "Bloomberg Markets: Asia." 

webcast

Italian Sovereign and Banks – Key Rating Triggers

Listen to Michele Napolitano, Fitch’s Head of Western Europe Sovereigns, and Francesca Vasciminno, Fitch’s Head of Italian Bank Ratings, provide a brief overview of the key rating triggers for the Italian sovereign and on the implications for the Italian banking sector from a potential rating action on the sovereign.

Operational Risk Capital May Rise for EU Banks, Fall in US

EU banks may need to hold significantly more capital for operational risk under the final version of Basel III reforms than under current requirements, while US banks may see a reduction in requirements.

Webcast: Residual Value Risk in Focus

Register to be part of the debate on the impact of residual value changes for car finance and find out our thoughts on what this means for the industry players.

Webcast on Fitch's Proposed Changes to Short-Term Ratings

Fitch is fundamentally reviewing its approach in assigning short-term ratings.  Our discussion paper details the greater optionality in assigning short-term ratings across multiple sectors. Learn more in our brief four-question survey, and from our recent webcast. Listen

Hong Kong Bank Tailwinds Offset by Rising Competition

Hong Kong banks' earnings are likely to be supported over the medium term by strong volume growth, particularly in lending to mainland China, and higher interest rates. However, rising competition in the local market could largely offset these positive trends, particularly for smaller banks, while there is a risk that banks shift into higher-yielding assets to support their margins.

rating action

20 Turkish Banks Downgraded; Outlook Negative

In Fitch's view, the banks' performance, asset quality, capitalisation and liquidity and funding profiles are now more likely to come under pressure as a result of the further depreciation of the Turkish lira (by about 20% against the US dollar since the last rating review).

Royal Commission Adds to Pressure on Australian Banks

Australian banks are likely to face additional profit pressure as a result of the Royal Commission's interim report into alleged misconduct in the financial sector. The findings should not affect bank credit ratings immediately, but could raise compliance and regulatory costs, lead to fines and legal class action and further slow credit growth. We maintain a negative outlook on the banking sector, which also reflects higher wholesale funding costs and rising loan-impairment charges.

Digital Carve-Outs in US an Emerging Threat to Online Banks

Several large U.S. banks have recently announced plans to launch separately branded digital bank platforms. This is part of a broader secular trend by financial institutions of investing more heavily in innovative technology in response to evolving customer demands for digital bank products and services, while seeking to improve their own cost efficiencies. 

Trade Risks Would Compound Canadian Banks' Consumer Exposure

Escalation of bilateral trade tensions with the U.S. or Canada's exclusion from a renegotiated NAFTA would increase risk for Canadian banks amid a slowing mortgage market and rising interest rates, potentially exacerbating the debt-service burdens of highly levered households.

Vietnam Banks Showing Improving Trends but Challenges Remain

Fitch Ratings expects its rated Vietnamese banks to sustain their improving operating trends in 2H18, on the heels of better credit quality and profitability, and broadly stable funding and liquidity in 1H18. We expect these banks to continue to capitalise on their higher earnings and the strong economy to reduce legacy bad debt exposures. 

Japan Banks' Profit Pressure May Spill Into Conduct Risks

The sustained squeeze on Japanese banks' interest margins over the last decade from intense competition and low policy rates continues to pressure banks to explore new revenue sources, including expanding the fee and commission business and increasing lending to higher-risk sectors or through more innovative structures, says Fitch Ratings.

rating action

Danske Bank's Outlook Revised to Negative; Affirms at 'A'

The Negative Outlook reflects uncertainty relating to the ultimate impact on the bank's capitalisation, franchise and funding profile, following a report publication on 19 September outlining the activities of the bank's Estonian non-resident portfolio between 2007 and 2015. 

Global Trade Tensions Add to APAC Bank Challenges

An escalation in global trade tensions could weaken the operating environment for banks in APAC by reducing demand for export finance, adding to credit risks for affected companies, and dragging on broader economic growth. Most banks are well-positioned to deal with effects that come through these channels, but could be more exposed if trade wars add significantly to market risks against the backdrop of global monetary tightening.

Video Roundtable

Asia-Pacific Banks’ Key Challenges

Kevin Duignan, Global Head of Financial Institutions hosts a roundtable discussion on APAC banks’ risks and opportunities – a key theme from Fitch’s Global Banking Conference in Hong Kong. He is joined by Jonathan Cornish, Head of APAC Banks; Sabine Bauer, Head of Hong Kong and Japan Banks and Grace Wu, Head of China Banks.

State Bank of India's Proposed Green Bonds Rated 'BBB-(EXP)'

Fitch Ratings has assigned State Bank of India's (SBI, BBB-/Stable) proposed senior unsecured debt an expected rating of 'BBB-(EXP)'.  SBI plans to use the proceeds from the proposed note issue to finance environmentally friendly projects in accordance with the bank's Green Bond Framework. 

rating action

Rated: Emirates Development Bank 'AA-'; Outlook Stable

Fitch's view of support factors in the sovereign's strong capacity to support the banking system, sustained by sovereign wealth funds and recurring revenue mostly from hydrocarbon production, despite lower oil prices, and the moderate size of the UAE banking sector relative to the country's GDP.

Contacts

Kevin Duignan

GLOBAL

Kevin Duignan

Analytical Group Head

+1 212 908 0630

Jose Santos

Global

Jose Santos

Business Group Head

+34 93 323 9044

Erwin van Lümich

GLOBAL

Erwin van Lümich

Business

+34 93 323 8403

Jonathan Cornish

APAC

Jonathan Cornish

Analytical

+852 2263 9901

Sing Chan Ng

APAC

Sing Chan Ng

Business

+65 6796 7210

James Longsdon

EMEA

James Longsdon

Analytical

+44 20 3530 1076

Alejandro Garcia

LATAM

Alejandro Garcia

Analytical

+1 (212) 908 9137

Diego Alcazar

LATAM

Diego Alcazar

Business

+1 212 908-0396

Joo-Yung Lee

NORTH AMERICA

Joo-Yung Lee

Analytical

+1 212 908 0560

John Bareiss

NORTH AMERICA

John Bareiss

Business

+1 312 368 3162