(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: EM Banking System Datawatch
MOSCOW/LONDON, April 17 (Fitch) Fitch Ratings says in the latest
its regular EM Banking System Datawatch that most major emerging
banking sectors will perform more weakly in 2014 than in recent
years due to
slower economies, higher rates, seasoning loan books and, in
some cases, greater
political uncertainty. However, bank credit metrics and ratings
largely resilient, given mostly solid buffers and only moderate
downturns. Downside risk is greatest in China and India, but has
risen in Russia
Fitch expects continued robust credit growth in China in 2014,
but at a slightly
slower pace of 18% (2013: 22%), increasing credit/GDP to 232%
Underlying asset quality pressures will rise (although reported
NPLs should stay
low), hurting liquidity, but the authorities will likely prevent
tightness in money markets.
Indian banks' asset quality is likely to weaken further, with
(NPLs and restructured loans) to rise from 10% (at mid-2013) to
during FY15 (ie by March 2015). State banks are most affected
and may need
INR3.8trn (USD60bn) of new equity by 2019 to achieve full
compliance with Basel
rules, although delayed implementation has reduced near-term
In most other major EM Asia markets, Fitch is less concerned
seasoning given banks' significant buffers.
The economic slowdown in Brazil will continue to put moderate
pressure on banks'
asset quality and margins. Most large lenders should be
resilient to these
challenges, but state-owned banks and some mid-sized/small
institutions are more
vulnerable, given, respectively, recent rapid growth in non-core
weaker funding and diversification. Fitch expects Mexican banks'
to stabilise in 2014, and lenders in Chile, Colombia, and Peru
to perform soundly.
The outlook for Russian banks has weakened, as geopolitical
reduced business confidence pressure economic growth (2014F:
0.9%; risks to the
downside). However, bank refinancing risks are manageable,
recession is not our
base case and banks' credit metrics should not deteriorate
risk is focused on sovereign-linked bank ratings, which
currently have Negative
Turkish banks will face a tough year of weakening asset quality,
and lower growth, as loan books season against a background of
higher rates, a
weaker currency, a slower economy and political uncertainty.
However, most banks
can absorb moderate stress, and downward rating pressure should
Sector NPLs remain high in Slovenia even after the 'bad bank'
transfers in 4Q13,
limiting upside for low bank ratings. Asset quality declined
again in Romania in
2013, but shows signs of plateauing in other weak Central and
Robust oil prices and government infrastructure spending should
and bank performance in most Gulf Cooperation Council markets.
have generally peaked and capital and liquidity are robust.
Positive trends are
most evident in UAE and Kuwait (potentially pushing up Viability
The full report is available at www.fitchratings.com or by
clicking the link
James Watson, CFA (Emerging Europe)
+7 495 956 6657
Fitch Ratings CIS Limited
26 Valovaya Street
Mark Young (APAC)
+65 6796 7229
Franklin Santarelli (Latin America)
+1 212 908 0739
Eric Dupont (Middle East and Africa)
+33 1 4429 91 31
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153,
Additional information is available at www.fitchratings.com.
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