March 18, 2021/Fitch Ratings
Widespread Use of Loan Moratoria Banks across EMs in the EMEA region have made extensive use of moratoria programmes introduced in response to the pandemic.
We estimate that take-up has been highest in Georgia, Hungary and Nigeria (where between 40% and 60% of loans were subject to moratoria at peak levels) followed by South Africa and the UAE (each at close to 20%). Utilisation has been more moderate in other markets, including Poland, Russia and Turkey at close to 10%.
Forbearance on Loan Classification Regulators have provided forbearance to banks in respect to classifying loans subject to moratoria. As a result, increases in impaired loan ratios were minimal in most markets in 2020, although more pronounced in Georgia and South Africa (in each case from quite a low base).
However, increases in Stage 2 loans (indicating increased credit risk) were more pronounced, in particular in the Czech Republic, Nigeria, South Africa, and the UAE. Loan impairment charges rose across all markets in 2020 from 2019 as banks were mostly proactive in their provisioning policies. Reported Asset Quality to Weaken We expect reported impaired loan ratios to increase across the region in 2021 with the termination of moratoria programmes and withdrawal of forbearance on loan classifications.
We see risks to banks’ asset quality as most significant in Nigeria, and also material in Turkey, Georgia, Hungary, South Africa, the UAE and Qatar.
Have Moratoria Been Mandated by Authorities or Introduced Voluntarily by Banks? Which Loans Are Eligible for Moratoria?
What Are the Key Terms of the Moratoria Programmes? What Proportion of Loans Have Utilised Moratoria in Different Markets? When Do the Moratoria Programmes Come to an End?
Could Any Loan Moratoria Be Further Extended? Have Banks Changed their Classifications of Loans under Moratoria?
How Have Banks Been Provisioning for Loans under Moratoria/Restructured Loans? What Proportion of Loans Which Entered Moratoria or Were Restructured Are Now Being Serviced Again?
In Which Banking Systems Will the Pandemic Have the Greatest Impact on Asset Quality?
