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Global Home > Banks

ECB Review Underscores Profit Challenge for European Banks

Further spending on risk management will continue to weigh on banks' profitability amid low interest rates, subdued loan growth and high competition. Persistent pressure on profitability could stall improvements in the banking sector's overall credit strength and limit near-term ratings upside, but strengthened risk-management frameworks should ultimately be credit positive.

Banks in AAA Jurisdictions Face Rising Household Debt Risk

In Australia, Canada, Norway and Sweden, high household debt amid slowing housing markets represent a growing risk to banks in those countries, which are among the world's most exposed to residential mortgage lending. The major banks also have, to varying degrees, a reliance on wholesale funding, which can increase their vulnerabilities during a market stress.

bnn bloomberg

Central Bank Independence Under Threat Everywhere

James McCormack, Global Head of Sovereign and Supranational Ratings at Fitch, spoke to BNN Bloomberg's Catherine Murray for a look at the catalysts causing central banks to lose some of their independence and what this can mean for global economies including the US and Canada.

Irish Banks' Non-Performing Loan Disposals Are Well On Track

Irish banks are well on track to meet their target of reducing their gross non-performing exposure ratio to 5% by the end of the year. Continued reduction of NPEs to improve asset quality and reduce capital encumbrance is important for Irish banks' ratings and could ultimately support upgrades.

US Fed Proposal Cuts Capital Requirements for Foreign Banks

The potential reduction of regulatory, capital and liquidity requirements for the US operations of foreign bank organizations from recent proposals by the Federal Reserve would generally be viewed as a credit negative.

Full Depositor Preference May Dent Portuguese Bank Profits

Depositor preference reduces recovery prospects for senior unsecured creditors in the event of a bank's resolution or liquidation and may, therefore, lead to marginally higher issuance costs for senior unsecured debt, including senior preferred instruments. This would drag on sector profitability, which is structurally weak due to low interest rates, subdued credit demand and fierce competition.

Webcast

Fitch on Australian Banks

Fitch Ratings hosted a webcast with Tim Roche, Senior Director of APAC Financial Institutions to discuss its credit views on the Australian major banks and the likely impact of recent developments, including the Royal Commission.

Listen now

Nigeria's 50bp Rate Cut is Insufficient to Boost Lending

The 50bp cut in Nigeria's monetary policy rate to 13.5% is unlikely to spur substantial growth in lending to priority sectors or wean banks off investing in Nigerian Treasury-bills (T-bills). We expect credit demand to stay weak and banks to continue favouring T-bills, as interest rates are still high.

U.S. GSIB Bank Ratings Likely Unaffected by Brexit Outcome

 With the UK's decision to leave the EU coming to a head, Fitch believes U.S. banks active in Europe are well prepared operationally for any potential outcome, and that Brexit is unlikely to be a ratings or credit issue. U.S. banks have largely updated their legal entity structures to be able to continue to conduct normal business operations and service clients in the UK and EU post Brexit.

ECJ Opens Door to Deposit Guarantee Schemes for Failing Banks

The European Court of Justice's (ECJ) ruling that support from a private-sector deposit guarantee scheme did not constitute illegal state aid will make it easier to use these schemes to restructure failing banks.

Uzbek Banks Stable, But Fast Growth and FC Lending Pose Risks

The sector outlook for Uzbek banks remains stable after 2018 results confirmed solid asset quality and profitability Fitch Ratings says. However, capitalisation and liquidity are modest, and there are risks from rapid loan growth (51% in 2018) and foreign-currency (FC) lending. 

Rise of Small US Banks in Commercial Real Estate Could Signal Trouble

Small US banks are gaining market share in commercial real estate (CRE) lending which could be worrisome given the loss history, especially in construction lending, according to a new dashboard from Fitch Ratings. Banks with less than $100 billion in assets have gained market share in CRE lending since the Great Recession. 

Governance Most Relevant of ESG Risks for Banks

Environmental, Social and Governance (ESG) risks tend to have limited direct effect on bank ratings, according to Fitch Ratings. However, more broadly, ESG factors influence rating decisions for a larger group of banks. For Fitch-rated global banks, 22% have ESG relevance scores that indicate ESG factors influence the rating ('4' or '5' on the 1-5 scale). 

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John Bareiss

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