(Fitch Ratings made the following statement on January 25, 2017)
Global rating outlooks are more negative than a year ago across most rating sectors, Fitch Ratings says in its latest global Credit Outlook report.
“The greatest challenges are undoubtedly faced by emerging market issuers in all sectors, but this is a global trend – the outlook bias is also negative for developed-market entities across the majority of sectors,” said Monica Insoll, Managing Director, in Fitch’s Credit Market Research team.
The Credit Outlook 1Q17 – Interactive Version
Our sovereign ratings have the greatest share of Negative Outlooks on a net basis, at 21%. This points to the likelihood of a third consecutive year in which downgrades outnumber upgrades in this sector, possibly by a wide margin. Pressures include a strengthening US dollar, global trade weakness and policy uncertainty. Many commodity export-dependent countries in the Middle East and Africa also still struggle to adjust to the dramatic decline in prices, despite the recent recovery.
The negative outlook bias is 10% for corporates and 11% for banks. The industries facing the greatest challenges include natural resources and traditional retail. The expected boost to US economic growth would be positive for corporates but the increased likelihood of rising interest rates is not.
In contrast, financial institutions stand ready to benefit from rising rates, which should allow a widening of their net interest margin. Banks in Europe face still slow economic growth and high NPLs in some countries (notably Italy and Portugal). Low rates remain a challenge for earnings, but do limit impairment charges.
