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www.fitchratings.com 10 July 2012

Global

Global Bank Rating Trends Q212Overall Shift Still Negative: Europe Takes the Lions Share of Negative Rating Actions

Special Report

Broad Picture Unchanged: Over 70% of ratings assigned by Fitch Ratings to banks globally

are on Stable Outlook. This has held true over the last five quarters (see Figure 2). Were we to

look at combined Outlooks and Watches, global bank ratings would show a marginally more

negative picture in Q212, with 21.5% of global bank ratings on Negative Outlook/Watch (Q112:

18.8%) and 3.6% on Positive Outlook/Watch (Q112: 3.8%).

Downgrades in Developed Markets: Of Q212 downgrades globally, 60% occurred in

developed markets (DM). This largely related to Spain. 18 Spanish banks were downgraded in

Q212, in line with the sovereign. At the same time, subsidiaries of some Spanish banks whose

ratings are based on parent support were downgraded in different regions.

Emerging Markets Outlooks Worsen: While the general outlook for DM remained relatively

unchanged, Negative Outlooks share of total rating alerts in emerging markets (EM) increased

to 13.6% (Q112: 8.9%), forcing the global figure for Negative Outlooks to trend upwards. These

Outlook revisions were triggered by sovereign actions, notably in India, Venezuela and Cyprus.

Global Downgrades Fall: The number of global bank rating downgrades continued to decline,

falling to 45 in Q212 from 57 in Q112.

More BBB Range Banks: Rating category migrations, quarter on quarter, are gradual but the

overall shift is down. Migration from A range ratings to BBB and BB continued in Q212. At

end-Q212, 44.4% of total DM bank ratings were in the A range (Q112: 46.9%), 28.4% (Q112:

26.9%) in the BBB category, and 9.3% (Q112: 8.0%) in the BB category. In EM, the

percentage of bank ratings in the A range also decreased , to 17.9% (Q112: 18.4%), and

36.4% (Q112: 35.4%) are now in the BBB range. Figures 5 and 6 illustrate this.

Global Upgrades Doubled: The total number of bank rating upgrades globally doubled to 16

(Q112: eight), of which six were in EM Central/Eastern Europe, five in EM Americas and five in

other regions.

Figure 2Global Banks: Outlooks on Long-Term IDRsRating status Q212 (%) Q112 (%) Q411 (%) Q311 (%)

Stable Outlook 544 73.5 569 77.0 585 76.9 582 76.3Positive Outlook 20 2.7 22 3.0 27 3.5 64 8.4Negative Outlook 131 17.7 114 15.4 59 7.8 71 9.3Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 7 0.9 6 0.8 6 0.8 6 0.8Negative Watch 28 3.8 25 3.4 77 10.1 34 4.5Evolving Watch 2 0.3 1 0.1 2 0.3 2 0.3No Outlook or Watcha 8 1.1 2 0.3 5 0.7 4 0.5Total 740 100.00 739 100.0 761 100.0 763 100.0aRating Watch or Outlook is applied selectively to ratings in the CCC, CC and C categoriesSource: Fitch

Figure 1

0

30

60

90

PositiveOutlook/Watch

Stable NegativeOutlook/Watch

DM EM

Global Banks Outlook/Watch

(%)

Source: Fitch

Related Research

Fitch Downgrades Cypriot Banks FollowingSovereign Downgrade (June 2012)

Fitch Revises Outlook on Indian FIs toNegative; Affirms IDRs (June 2012)

Fitch Downgrades Three Egyptian Banks to'B+'; Outlook Negative (June 2012)

Fitch Takes Rating Actions on Spanish

Banks Following Sovereign Downgrade(June 2012)

Fitch Downgrades Santander & BBVA to'BBB+'/Negative Outlook on Sovereign Action(June 2012)

Fitch: Japan's Major Banks on RWN onSovereign Downgrade (May 2012)

Fitch Downgrades Greek Banks to 'CCC'(May 2012)

Fitch Revises Outlook on 5 VenezuelanBanks to Negative Following SovereignAction(April 2012)

Global Bank Rating Trends: A New QuarterlyPublication (April 2006)

Global Economic Outlook (June 2012)

Analysts

Janine Dow+33 1 44 29 91 38

[email protected]

Bridget Gandy+44 20 3530 [email protected]

Joo-Yung Lee+1 212 908 0560

[email protected]

Mark Young+65 6796 [email protected]

Franklin Santarelli+1 212 908 [email protected]

ResearchEris Huang+44 20 3530 [email protected]
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Global Bank Rating Trends Q212July 2012

2

Figure 3 Figure 4

EM CEE

18%

DM

Americas

13% DM

Europe

61%

EM

Americas

4%

Distribution of DowngradesQ212

Source: Fitch. (Total number of downgrades: 45)

EM Middle

East/Africa

4%

DM

Americas

13%

DM

Europe

6%

EM

Americas

31%

EM

Central/E

astern

Europe

38%

Distribution of UpgradesQ212

Source: Fitch. (Total number of upgrades: 16)

DM Asia/

Australasia

6%

EM Middle

East/Africa

6%

Figure 5

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10

20

30

40

50

AAA AA A BBB BB B CCC CC

Q212 Q112

Developed Market Rating Stock

(Rating distribution)

(%)

Source: Fitch

Figure 6

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10

20

30

40

AAA AA A BBB BB B CCC CC C

Q212 Q112

Emerging Market Rating Stock(Rating distribution)

(%)

Source: Fitch

Sovereign Drivers

During Q212, Fitch downgraded the following sovereign ratings, which triggered actions on

banks rated by Fitch:

Spains Long-Term IDRs downgraded to BBB/Negative Outlook from A/Negative Outlook

Greeces Long-Term IDRs downgraded to CCC from B/Stable Outlook

Cypruss Long-Term IDRs downgraded to BB+/Negative Outlook from BBB/NegativeOutlook

Japans Long-Term IDRs downgraded to A+/Negative Outlook from AA/Negative Outlook

Egypts Long-Term IDRs downgraded to B+/Negative Outlook from BB/NegativeOutlookRelated Criteria

Global Financial Institutions Rating Criteria(August 2011)
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Many bank ratings also experienced a knock-on impact following the revision of Outlook on the

sovereign ratings below:

Venezuelas rating alert revised to B+/Negative Outlook from B+/Stable Outlook

Gabons rating alert revised to BB/Positive Outlook from BB/Stable Outlook

Uruguays rating alert revised to BB+/Positive Outlook from BB+/Stable Outlook

Indias rating alert revised to BBB/Negative Outlook from BBB/Stable Outlook

Trends in Developed Markets

Figure 7Banks in Developed Markets: Outlooks on Long-Term IDRsa

Q212 (%) Q112 (%) Q411 (%) Q311 (%)

Rating statusStable Outlook 213 66.1 218 67.9 225 67.4 252 73.9Positive Outlook 9 2.8 8 2.5 8 2.4 9 2.6Negative Outlook 74 23.0 77 24.0 43 12.9 51 15.0Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0

Positive Watch 2 0.6 2 0.6 3 0.9 4 1.2Negative Watch 19 5.9 16 5.0 55 16.5 25 7.3Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 322 100.0 321 100.0 334 100.0 341 100.0DM AmericasStable Outlook 66 75.9 65 74.7 73 79.3 73 76.0Positive Outlook 8 9.2 7 8.1 5 5.4 5 5.2Negative Outlook 8 9.2 12 13.8 9 9.8 11 11.5Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 0 0.0 0 0.0 0 0.0 0 0.0Negative Watch 5 5.8 3 3.4 5 5.4 7 7.3Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 87 100.0 87 100.0 92 100.0 96 100.0DM EuropeStable Outlook 112 57.7 114 59.1 114 56.7 143 70.1Positive Outlook 1 0.5 1 0.5 1 0.5 1 0.5

Negative Outlook 65 33.5 64 33.2 34 16.9 39 19.1Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 2 1.0 2 1.0 3 1.5 4 2.0Negative Watch 9 4.6 12 6.2 49 24.4 17 8.3Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 194 100.0 193 100.0 201 100.0 204 100.0DM Asia/AustralasiaStable Outlook 35 85.4 39 95.1 38 92.7 36 87.8Positive Outlook 0 0.0 0 0.0 2 4.9 3 7.3Negative Outlook 1 2.4 1 2.4 0 0.0 1 2.4Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 0 0.0 0 0.0 0 0.0 0 0.0Negative Watch 5 12.2 1 2.4 1 2.4 1 2.4Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 41 100.0 41 100.0 41 100.0 41 100.0a Table excludes ratings with no Outlook or Watch

Source: Fitch

There was little change to Outlooks on DM banks in Q212 compared with the previous quarter.

The proportion of Stable Outlooks fell slightly to 66.1% (Q112: 67.9%). However, year on year,

the shift is more pronounced: in Q111, nearly three-quarters of ratings assigned to DM banks

had Stable Outlooks. The figures for negative prospects (Negative Outlook and Watch) and

positive prospects were relatively unchanged at 28.9% (Q112: 29.0%) and 3.4% (Q112: 3.1%),

respectively. The number of banks with no Outlook/Watch (typically only applicable in the

CCC to C or default categories) increased as five Greek banks were downgraded to CCC.

Within DM, downgrades were mostly of one or two notches, and European banks accounted for

60% of total downgrades (see Figure 3). Spanish banks featured prominently, followed by

Greek banks. Downgrades in DM America were concentrated in the US.

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EuropeFollowing the sovereign downgrade of Spain, a large number of Spanish banks and their

subsidiaries (whose ratings are driven by parent support) were downgraded, and Negative

Outlooks (or Watches) remained on the majority of Spanish banks. This reflects Fitchs

concerns relating to the weak economic environment and further asset quality deterioration in

the troubled real estate sector for some institutions. The subsidiaries of Spanish banks thatwere downgraded included two Portuguese banks and one in the UK.

Figure 8

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30

40

Austria Benelux Nordics France Germany GIP Spain Italy Switzerland UK

Positive Outlook/Watch Stable Outlook

Negative Outlook/Watch Downgrades

Developed European Banks Outlooks

(No.)

Source: Fitch. "Benelux" comprises Belgium, Luxembourg and Netherlands ; "Nordics" comprises Denmark, Finland,Norway and Sweden; " GIP" comprises Greece, Ireland and Portugal. Data shown only for countries with more than 3Fitch rated public ratings in the sample

During Q212, five Greek banks with Long-Term IDRs at their Support Rating Floors were

downgraded to CCC from BB , when the downgrade of the Greek sovereign rating triggered

a downgrade of the banks Support Rating Floors. This reflects the sovereigns diminished

ability to support its banking sector. In the UK, one bank was downgraded, whose IDR is based

on support from its Egyptian parent. This reflected the rating action on its parent, triggered by

negative sovereign action.

AmericasThe rating Outlooks for banks in developed Americas remained relatively stable during Q212.

While the number of Negative Outlooks decreased by four, the number of Stable Outlooks,

Positive Outlooks and Negative Watches increased slightly. In the US, First Republic Bank and

First National of Nebraska had their rating Outlook revised to Positive (from Stable) reflecting

their improved financial profiles.

Figure 9

0

20

40

60

80

Bermuda Canada US

Negative Outlook/Watch Stable Outlook

Positive Outlook/Watch Downgrades

Developed American Banks Outlooks

(No.)

Source: Fitch

In May, Fitch downgraded JPMorgan Chase & Co.'s (JPM) rating to A+ from AA - and placed

it on RWN following the announcement of a USD2bn trading loss uncovered in its synthetic

credit positions in its Chief Investment Office. While the size of the loss was manageable and

JPM retains a strong franchise, its ratings remain at heightened risk for downgrade until the

firm's risk governance practices, appetite, oversight and the reputational impact can be furtherreviewed. In June, the US subsidiaries of Santander and BBVA were downgraded, mirroring

similar rating actions taken on their parents following Spanish sovereign rating action.

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Asia/Australasia

In developed Asia, negative ratings migration was more pronounced but is solely attributed to

the revision of rating alerts to Negative (from Stable) on Japanese banks, following the

Japanese sovereign downgrade. The percentage of Stable Outlooks decreased to 85.4%

(Q112: 95.1%) and the percentage of Negative Watches increased to 12.2% from 2.4%. There

were no downgrades in developed Asia over the quarter, but the flipside is that there are no

Positive Outlooks/Watches assigned to developed Asian/Australasian banks.

Figure 10

0

2

4

6

8

10

12

Australia HK Japan Macao New Zealand Singapore

Negative Outlook/Watch Stable Outlook Positive Outlook/Watch

Developed Asian Banks Outlooks

(No.)

Source: Fitch.

Trends in Emerging Markets

The outlook on bank ratings in the EM worsened in Q212, as the proportion of Negative

Outlooks increased in EM Asia, EM America and EM Europe. Rating actions were largely taken

in response to similar actions taken on either sovereign ratings or parent banks ratings,

reflecting the high proportion of support-driven bank ratings in these markets.

Emerging Europe

Figure 11

0

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20

30

40

50

60

Azerbaijan Belarus Bulgaria Georgia Kazakhstan Poland Romania Russia Solvenia Ukraine


Emerging European Banks Outlooks

(No.)

Source: Fitch. Data shown only for countries with more than 3 Fitch rated public ratings in the sample

The outlook for emerging European banks in Q212 remained broadly stable compared with the

previous quarter, with 70.1% of the banks on Stable Outlook (Q112: 71.5%) and 23.0% with

negative prospects (Q112: 22.3%).

Three Cypriot banks were downgraded and placed on Negative Outlooks (from RWNs),

triggered by the June downgrade of the Cypriot sovereign rating. In contrast, the agency

upgraded two banks in Kazakhstan, namely Kazkommertsbank and Bank Centercredit, after a

reassessment of their default risks. Three Russian banks were upgraded during the period:

Credit Bank of Moscow, Bank of Moscow and Bank Bcc-Moscow (the last of which is a

subsidiary of Bank Centercredit).

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Figure 12Banks in Emerging Markets: Outlooks on Long-Term IDRsa

Q212 (%) Q112 (%) Q411 (%) Q311 (%)

Rating statusStable Outlook 331 79.2 351 84.0 360 85.3 330 78.9Positive Outlook 11 2.6 14 3.3 19 4.5 55 13.2Negative Outlook 57 13.6 37 8.9 16 3.8 20 4.8Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 5 1.2 4 1.0 3 0.7 2 0.5Negative Watch 9 2.2 9 2.2 22 5.2 9 2.2Evolving Watch 2 0.5 1 0.2 2 0.5 2 0.5Total 418 100.0 418 100.0 422 100.0 418 100.0EM AsiaStable Outlook 89 84.8 98 93.3 100 95.2 91 87.5Positive Outlook 3 2.9 4 3.8 5 4.8 11 10.6Negative Outlook 11 10.5 2 1.9 0 0.0 0 0.0Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 2 1.9 1 1.0 0 0.0 0 0.0Negative Watch 0 0.0 0 0.0 0 0.0 2 1.9Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 105 100.0 105 100.0 105 100.0 104 100.0EM Americas

Stable Outlook 66 78.6 76 89.4 76 87.4 74 88.1Positive Outlook 4 4.8 5 5.9 5 5.7 9 10.7Negative Outlook 12 14.3 2 2.3 1 1.1 0 0.0Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 0 0.0 1 1.2 1 1.1 0 0.0Negative Watch 2 2.4 1 1.2 4 4.6 1 1.2Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 84 100.0 85 100.0 87 100.0 84 100.0EM EuropeStable Outlook 101 70.1 103 71.5 106 73.1 99 67.8Positive Outlook 3 2.1 4 2.8 8 5.5 23 15.8Negative Outlook 26 18.1 25 17.4 11 7.6 16 11.0Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 2 1.4 2 1.4 1 0.7 1 0.7Negative Watch 7 4.9 7 4.9 17 11.7 5 3.4Evolving Watch 2 1.4 1 0.7 2 1.4 2 1.4

Total 144 100.0 144 100.0 145 100.0 146 100.0EM Middle East and AfricaStable Outlook 75 88.2 74 88.1 78 91.8 65 77.4Positive Outlook 1 1.2 1 1.2 1 1.2 12 14.3Negative Outlook 8 9.4 8 9.5 4 4.7 4 4.8Evolving Outlook 0 0.0 0 0.0 0 0.0 0 0.0Positive Watch 1 1.2 0 0.0 1 1.2 1 1.2Negative Watch 0 0.0 1 1.2 1 1.2 1 1.2Evolving Watch 0 0.0 0 0.0 0 0.0 0 0.0Total 85 100.0 84 100.0 85 100.0 84 100.0a Table excludes ratings with no Outlook or WatchSource: Fitch

Americas

Stable Outlooks continue to dominate the universe of emerging American banks. Nevertheless,ratings migration within this portfolio has been quite pronounced since Q311 and the general

outlook for these banks has deteriorated somewhat. In Q212, 78.6% of ratings had Stable

Outlooks (Q311: 88.1%), while the proportion of ratings on Negative Outlook/RWN rose to

16.7% (Q311: 1.2%). The weakening outlook can be explained by the revision of Outlooks to

Negative (from Stable) on five Venezuelan banks, reflecting similar rating action taken on the

sovereign.

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Figure 13

0

5

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15

20

25

Brazil Chile Colombia Mexico Panama Peru Venezuela


Emerging American Banks Outlooks

(No.)

Source: Fitch. Data shown only for countries with more than 3 Fitch rated public ratings in the sample.

The revision of Outlooks to Negative (from Stable) on Santanders and BBVAs Latin American

subsidiaries also helps explain the increased number of Negative Outlooks in the region. In

addition, the number of Negative Watches increased by one as the agency placed HSBC Bank

(Uruguay) on RWN following the announcement that the company is being acquired by

Colombias Banco GNB Sudameris SA.

During Q212, Fitch downgraded the ratings on Banco Santander (Mexico), S.A. and Banco

Santander (Brasil) S.A. after the downgrade of their parents. At the same time, five banks were

upgraded in the region on their own merits.

Asia

The proportion of Stable Outlooks in emerging Asia continued to trend downward, falling to

84.8% (Q112: 93.3%), and the proportion of Negative Outlooks increased significantly to 10.5%

from 1.9% because eight Indian banks had their Outlooks revised to Negative (from Stable),

affected by similar rating action on the sovereign. The agency placed PT Bank Danamon

Indonesia Tbk on Positive Watch to reflect support from its new strategic controlling

shareholder, highly rated DBS Group Holdings. There were no downgrades or upgrades inemerging Asia over the quarter.

Figure 14

0

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30

China India Indonesia Korea Malaysia Philippines Taiwan Thailand Vietnam


Emerging Asian Banks Outlooks

(No.)

Source: Data shown only for countries with more than 3 Fitch rated public ratings in the sample

Middle East and Africa

Ratings assigned to Middle Eastern and African banks remained broadly unchanged over the

quarter. Two Egyptian Banks, namely National Bank of Egypt and Commercial International

Bank, were downgraded to B+ from BB following negative rating action taken on Egypts

sovereign ratings. The agency upgraded Access Bank Plcs rating to reflect an increased

likelihood of support from the Nigerian authorities if needed.

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Figure 15

0

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Bahrain Kuwait Oman Qatar Saudi Arabia South Africa Turkey UAE


Middle East and African Banks Outlooks

(No.)

Source: Data shown only for countries with more than 3 Fitch rated public ratings in the sample.

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Annex: Background Information Relating to this Study

Rating Stock: Note on the Number of Rated Banks Used in this Study

In this report, the number of rated banks is calculated considering only one entity per country.

For example, all rated Bank of America (BOA) Corporation-related companies operating in the

US would be counted as one rating; rated BOA companies operating outside the US would becounted as one rating per country, so that if two BOA companies operated in Japan, for

example, Fitch would count only one Japanese BOA rated entity.

Rating Actions

In this report, rating actions are defined as changes to Issuer Default Ratings (IDRs) assigned

to a bank by Fitch. Changes to IDR Outlooks and rating alerts (Rating Watches) are also

considered to be rating actions. Fitch only counts rating actions taken from the start of the

period (Q112) to the end of the period (Q212) and ignores rating actions taken during the

interim months. For example, rating actions may have been taken on a banks IDR in April, May

and June, but this report will only track the change from end-March 2012 to end-June 2012.

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ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATINGDEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'SPUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, ANDMETHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT,CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHERRELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCTSECTION OF THIS SITE.

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