Financial sector’s credit conditions continue to improve: Fitch

As the global economic recovery gains traction, the credit rating outlook for the world’s financial institutions continues to improve, says Fitch Ratings.

In a new report, the rating agency said that the number of negative outlooks and rating watches on global financial institutions’ credit ratings continued to decline in the second quarter of 2021, “signalling that pressure from the pandemic is receding.”

Fitch reported that the proportion of bank ratings on negative outlook or watch dropped below 50% in Q2 for the first time since the pandemic emerged. And, that share was down to about 40% by the end of the quarter.

For non-bank financial institutions and insurers, the proportion of negative outlooks and watches were almost back to pre-crisis levels by the end of the second quarter, Fitch noted.

There were 472 rating actions taken on global financial institutions in the second quarter. Of these, about 30% were revisions to stable from negative, and about 60% resulted in unchanged ratings and outlooks.

“For banks, positive rating actions were largely due to a combination of improved operating environments and intrinsic creditworthiness,” Fitch said.

Among the non-banks, positive ratings actions were driven by improvements in credit profiles or because of M&A activity, it noted.

“Insurance ratings had the highest proportion of positive actions, mostly driven by strong capitalization or M&A,” Fitch added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.