December 26, 2022/Fitch Ratings

A difficult macro environment will continue to create challenges for emerging-market (EM) banks in 2023, says Fitch Ratings in three newly published reference reports on the sector.

Slower economic growth, high inflation and weaker currencies will impair some borrowers’ repayment capacity, and pressure banks’ asset quality.
 
Higher rates and margins will support banks’ revenues, but higher-for-longer rates will also weaken some borrowers’ ability to service debt, and in some markets will stress sovereign credit profiles, also negatively affecting banks. 

Further rate increases can also drive losses on securities books, offsetting margin gains.