Fitch changed the Outlook on the banking sector to “negative”
- 26 March 2020
The Fitch Ratings Agency downgraded the banking sector to negative for seven of the eight markets in the region – Russia, Ukraine, Kazakhstan, Armenia, Azerbaijan, Belarus and Georgia, APA reports citing Interfax.
For the banking sector of Uzbekistan, the forecast remained “stable”.
The changes in the forecast of the Agency is tied to the fact that the banks in these seven countries have come under economic pressure caused by the consequences of the introduction of measures to combat coronavirus and lower oil prices.
“The degree of pressure on banks will depend on the extent and duration of the economic downturn, the specific risks for national economies and external funding (for example, lower oil prices, income from tourism or remittances), policies of national authorities and the business profile of individual banks”, – stated in the message of the Agency.
The likelihood of negative rating actions, in particular, will depend on the support of banks by the state or by the shareholders.
The profitability of banks will decline due to the limited number of new loans and higher costs to cover the risks, warned the Agency. The asset quality of banks will decrease due to the slowdown in the economy and a large number of dollar-denominated loans amid falling national currencies, but in Russia, to a lesser extent, Fitch believes. In recent years, the authorities actively pursued a policy of de-dollarization, the RBC TV channel says.