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Global Home > Banks

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.

Fitch Publishes Cross-Sector Discussion Paper on Short-Term Ratings

Fitch published a Discussion Paper exploring possible changes to its approach in assigning short-term ratings, including the current correspondence table between Long-Term and Short-Term Issuer Default Ratings (IDRs). We are considering ways to offer a more differentiated analytical view of short-term risk between issuers. Fitch is seeking feedback from market participants by October 31, 2018.

US Banks' Strong 2Q Results Supportive of Credit Ratings

Second-quarter results for the majority of 19 large U.S. banks showed year-over-year (YOY) improvement in revenue growth and cost controls, with a continuation of sustained benign credit quality

Turkish Banks' Negative Outlooks Reflect Multiple Risks

Depreciation of the Turkish lira, higher interest rates and slowing economic growth pose significant risks to banks' performance, asset quality, capitalisation, funding and liquidity. We expect sector performance to deteriorate in 2018 and most of the banks' ratings are still on Negative Outlook or Rating Watch Negative.

Regulatory Fine Shows HK Banks' Elevated Compliance Risks

The Hong Kong Monetary Authority's (HKMA) recent decision to discipline Shanghai Commercial Bank (SCB) demonstrates the authority's determination in taking tangible action on anti-money laundering and counter-terrorist financing, which should further strengthen the compliance culture in the Hong Kong banking sector. However, the incident also highlights the potential financial crime and compliance risks faced by Hong Kong banks as a result of the territory's role as an international financial hub and its integration with the Chinese financial system.

Capital Woes Continue for Indian Banks

Fitch Ratings' outlook on the Indian banks sector is likely to remain negative until the banks address their weak core capital positions against mounting bad debt and poor financial performance.

CBA Results Highlight Pressure Points for Australian Banks

Fitch Ratings says the Commonwealth Bank of Australia's (CBA; AA-/Negative/aa-) full-year results to 30 June 2018 (FY18) broadly support the agency's expectation that earnings pressure would emerge for Australian banks during 2018. An increase in wholesale funding costs led to a reduction in CBA's net interest margin in 2H18, loan growth continued to slow and continued investment into the business and compliance contributed to higher expenses.

Salvadorian Banks Continue to See Limited Growth

Fitch Ratings has published a dashboard on the performance of the largest Salvadorian banks for the first half of 2018 (1H18). Fitch believes the Salvadorian banking system continues to face limited growth with narrower increment on remittances inflows after peak growth during 2017. 

2Q18 U.S. Bank Earnings: Revenue, Cost Control and Lower Taxes Spur Growth

Joo-Yung Lee, Managing Director, North America Financial Institutions, provides an overview of US bank earnings for 2Q18

Deutsche Bank Needs to Build Momentum to Reach Earnings Target

Deutsche Bank's (BBB+/Negative) 2Q18 results were affected by the bank's restructuring, but reported pre-tax profit of EUR711 million showed reasonable revenue resilience during a quarter when the bank exited business segments no longer considered core,

Global Bank Rating Trends Turn Positive

Bank upgrades (26) outnumbered downgrades (21) in 1H18 for the first time since 1H14, led by upgrades in Europe and Asia Pacific. Downgrades were dominated by emerging markets in the Americas and the Middle East and Africa, continuing the recent theme of bank rating trends being generally more negative in emerging markets.

Webcast Replay

Global Bank Regulation Review

Monsur Hussain, Fitch’s Head of Financial Institutions Research - Regulatory Policy, together with Alan Adkins, Head of Financial Institutions Central Functions and Research Group, reviewed the latest developments in global bank regulation and the impact these changes may have on credit investments.

Macroprudential Regs Affecting APAC Banks More Than Basel

Regulators in most Asia-Pacific (APAC) markets are likely to remain proactive in their use of macroprudential measures, and this could have a greater near-term impact on banks' operating environment and credit profiles than the adoption of Basel III global standards. That said, Basel III will play an important positive role over the longer term, as rules are fully implemented.

EU Stress Test Generally Tougher but Methodology Changes May Limit Capital Depletion

The adverse scenario applies an 8.3% deviation of EU GDP from the baseline level in 2020 and fears around a Nordic asset bubble and Brexit lead to deep unemployment and real-estate price shocks for Denmark, Sweden and the UK.

rating actions

Fitch Reviews Global Trading and Universal Banks

Our rating action highlight Fitch's view that solid company profiles and improved risk appetite are important factors that drive the GTUBs' ability to generate sound earnings. As global operating groups, the GTUBs are subject to regulatory scrutiny in a wide range of jurisdictions and have to meet regulators' expectations.

Teleconferece ReplayGlobal Trading and Universal Banks Peer Review

 

Canadian Bank Bail-In Completes Credible DSIB Regulation

Canadian bank bail-in rules, which come into effect on Sept. 23, finalize a credible resolution framework for Canadian domestic systemically important banks (DSIBs). With the bail-in, total loss absorbing capacity (TLAC) and nonviability contingent capital (NVCC) requirements in place, Canada has completed the main tenets of an orderly resolution for a failing or failed DSIB.
 

China Bank Reform Positive But Too Soon for Mass Upgrades

China's tightened regulatory stance has slowed the build-up in financial-sector risks and should help improve the financial system's overall stability. However, Fitch Ratings does not believe these measures have reduced risks meaningfully enough to warrant the type of sector-wide bank rating upgrades recently made by Moody's.

Strong Franchises Help Major NZ Banks Offset High Macro Risks

The strength of the domestic franchises of the four largest New Zealand banks supports their respective Viability Ratings and helps to offset continued high macroeconomic risks.

Bank of Ireland Ambitions Reflect Progress, but Add Risk

Bank of Ireland's plans to grow its loan book to about EUR90 billion by end-2021, up 20% from end-2017, reflect its strengthened capital position, improving asset quality and a favourable domestic economic environment.

2018 Global Banking Conference NY

Regulation: Will the Reins Be Loosened?

In a discussion lead by Joo-Young Lee, Head of N. America Banks, Christopher Wolfe, Managing Director, covers the benefits of routine stress testing, how regulations support bank fundamentals & the effect of the Dodd-Frank rollback on small banks

Credit Perspectives on South African Banks

Andrew Parkinson, a Director in our Financial Institutions team in London, discusses the outlook for the South African banking sector and the relationship between bank and sovereign ratings.

Tunisia Bank Reforms Inch Ahead Despite Economic Pressure

Tunisian banking regulation is slowly improving from a weak base, which could be credit positive for banks in the long term. But it is likely to be several years before Tunisia's work with the IMF to strengthen banking supervision and move towards international standards of reporting and transparency meaningfully improve banks' credit quality. 

Credit Hotspot: Italian Banks

Latest: Unlikely-to-Pay Loans Widen Italian Special Servicing

2018 Global Banking Conference - New York

The Future of Risk: Crypto & Blockchain​

Kevin Duignan, Global Head of Financial Institutions, joins The Wall Street Journal’s Paul Vigna at Fitch’s Global Banking Conference in New York, for a fireside chat on cyber risk and cryptocurrencies.

Volcker 2.0 to Cut Compliance Costs, Facilitate Trading

The Federal Reserve's notice of proposed rulemaking (NPR) simplifying the Volcker Rule would reduce compliance and regulatory requirements associated with the rule. The proposed rule is more activities-based. Banks with limited or little trading activities will see the most relief. 

Impact on Risk Transfer Transactions Likely from New Basel Framework

The new Basel framework for securitisations to impact capital charges for retained risk of capital relief transactions, potentially reducing the capital relief benefit. This may lead to lenders having to execute financial guarantees on second-loss positions in order to achieve the same amount of capital relief. 

Bail-in May Become More Complex For Mid-Sized EU Banks

Proposed amendments to the EU Bank Recovery and Resolution Directive regarding minimum levels of bail-inable subordinated debt may make it harder to effect a bail-in resolution on mid-sized banks that run into trouble.

Solid Profits for South African Banks Despite Political Upheaval

Operating profit increased by 8% and returns on equity, assets and risk-weighted assets all improved (mainly driven by lower loan impairment charges - down almost 10% yoy) despite political turbulence, sluggish economic growth and a sovereign downgrade to a sub-investment-grade rating (BB+). 

Dodd-Frank Easing May Be Long-Term Negative for US Banks

Congressional passage of financial reform legislation easing the Dodd-Frank Act for smaller and custodial banks is not likely to be a near-term ratings issue but could be negative for some banks' credit profiles over the long term, if it results in significantly reduced capital levels

US Banks Sustain Margin Expansion Unlike Past Fed Tightening Cycles

"Contrary to past tightening cycles, this time banks are experiencing margin expansion as asset yield betas (or, how much earning asset yields have increased relative to the Fed Funds target rate) have outpaced funding cost betas," said Bain Rumohr, Senior Director, Fitch Ratings. 

chart of the month

Spanish Banks' Loan Stock to Resume Modest Growth in 2018

The latest developments in the Spanish banking sector suggest that banks' stock of domestic private-sector loans is likely to start rising in 2018 for the first time since 2010.

Rising US Dollar Will Test EM Vulnerabilities Across Sectors

EM issuers are facing more challenging economic and financial conditions as interest rates rise and central bank monetary policy becomes less accommodative. Access more research on our Interest Rates Credit Hotspot.

FT-Fitch Global Banking Conference Highlights

  • Joo-Yung Lee, Fitch, and Alison Rose, RBS, on funding for SMEs and the relationship between FinTech start-ups and the banks
  • Gilles Moëc, Bank of America Merrill Lynch, on risks involved with non-bank lenders
  • Alison Rose, RBS, on regulation and the restriction on big banks
  • Tracy Blackwell, Pension Corp, on long term lending of insurance companies vs the banks
  • Joo-Yung Lee on impact of banks post crisis

View Highlights

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

Marina Paoletti

EMEA - Developed Markets

Marina Paoletti

Business

+39 02 879087 236

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