Third-quarter rating actions limited despite sub-prime crisis

Third-quarter rating actions limited despite sub-prime crisis - Fitch

	Published : Mon, 22 Oct 2007 14:47 By : Agencies Print this Story

MUMBAI (Thomson Financial) - Fitch Ratings said the the number of bank rating actions globally was remarkably limited in the third quarter, despite unprecedented liquidity shock in global financial markets.

According to a Fitch's quarterly report titled 'Global Bank Rating Trends' covering the quarter to end September, there were only 13 negative actions in the quarter in the developed markets, six of which were downgrades, and only four were due to the sub-prime induced crisis.

These included Countrywide Financial Corp in the US and Northern Rock PLC in the UK.

The impact would have been somewhat greater if the German banks -- IKB and Landesbank Sachsen, both of which failed and had their Individual Ratings lowered to 'F'-- had not been at their support rating floors, the ratings agency said in a release.

As expected by Fitch, external support was provided and neither bank defaulted.

Fitch added there have been a number of further negative rating actions after the quarter end, as pressure is put on earnings, especially of those banks with substantial investment banking operations.

Overall, 78.5 pct of rated banks continue to have stable outlooks, with 14.5 pct on positive outlook and 3.5 pct on negative outlook, Fitch said.

'This slight positive bias is likely to be eroded in the near-term,' said Gerry Rawcliffe, managing director in Fitch Ratings' financial institutions group adding that achieving rating upgrades is going to be difficult in the current environment.

Fitch report noted the lack of impact of current crisis on the emerging markets but expressed concern about those banking systems, most notably Kazakhstan's and to a lesser extent Russia's, where there has been not only explosive growth in lending but also a high reliance on international capital markets to fund it.

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Third-quarter rating actions limited despite sub-prime crisis - Fitch