Outlook for global financial sector improves

Amid a continuing economic recovery, the credit rating outlook for financial institutions is brightening, Fitch Ratings says.

The rating agency reported that in the first quarter of 2021, 66% of its rating actions on global financial institutions resulted in unchanged ratings, while 20% involved revisions from negative to stable. Just 11% of the rating actions were downgrades or negative outlook revisions.

These trends signal that “near-term ratings risks are easing,” Fitch said. But even with the recent improvement, the financial sector isn’t out of the woods just yet.

Fitch noted that the share of global ratings that carry a negative outlook or negative rating watch remains elevated by historical standards.

“Downside risks remain, including potential further coronavirus waves, weakened sovereign credit profiles and an economic fallout as governments gradually withdraw pandemic-related economic support,” Fitch said.

For the rest of this year, Fitch said that it expects the stabilization in rating outlooks to vary by region “due to contrasting speeds of economic recovery and different degrees of exposure to the sectors most affected by the pandemic.”

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.