[ET Net News Agency, 8 May 2020] The outlook on global banks has turned sharply more
negative in recent weeks as a result of the significant effects of the coronavirus
pandemic, oil shock, and market volatility, S&P Global Ratings said in a report titled
"How COVID-19 Is Affecting Bank Ratings: May 2020 Update".
"We took 175 rating actions on banks between the start of the pandemic and May 4," said
S&P's credit analyst Alexandre Birry. "Nevertheless, 82% (143 banks) were outlook
revisions, while only 18% (31) were downgrades."
The credit rating agency continues to expect that bank rating downgrades this year due
to the COVID-19 pandemic will be limited by banks' strengthened balance sheets over the
past 10 years, the support from public authorities to household and corporate markets, and
our base case of a sustained economic recovery next year.
Nevertheless, S&P's outlook bias has turned markedly negative, following the recent
downward revision of its central economic forecasts, continued material downside risks to
these forecasts, and the potential longer-term impact on banks' profitability.
"We expect bank ratings to be largely resilient but we cannot rule out further rating
actions, including some downgrades, in particular for banks with pre-existing financial
strength issues," said Birry.
Although emerging market banks are often more exposed than developed market peers, S&P
expects most will face earnings rather than a capital shock, exacerbated by lower investor
appetite and increasing funding cost for systems dependent on external financing, and the
oil-price shock for some. (KL)