Fitch: Improved prospects for most emerging market banks

Fitch: Improved prospects for most emerging market banks

Azerbaijan, Baku, April 29 /Trend/

On April 29, Fitch Ratings says in a special report that prospects have improved for most emerging market (EM) banks in recent quarters as the global economic recovery gains momentum and many EMs are forecasted to return to solid growth in 2010. However, Fitch has significant asset quality concerns about banks in China in the medium term, following recent rapid loan expansion in that market, and many banking systems across Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) are still working through asset quality problems and adapting to funding constraints which have emerged during the crisis.

In most EMs, particularly in Latin America and Asia, banks have weathered the crisis better than was anticipated 18 months ago, and positive rating actions exceeded negative ones in H209 and Q110. Bank upgrades in Turkey (Q409) and Indonesia (Q110) have followed sovereign rating actions, and most Russian privately-owned banks were placed on Rating Watch Positive/Evolving in Q110, reflecting the sector's better than expected performance during the crisis. Even in markets worst affected by the crisis, such as Kazakhstan, Ukraine and the Baltics, any further negative rating actions are likely to be limited given significant downgrades to date, potential parent bank support and some signs that recessions are starting to bottom out in these countries.

Loan growth in China in 2009 far outpaced that in other EMs, and by year-end Chinese banking assets exceeded those of the other 23 systems covered in Fitch's report, combined. Although Chinese loan growth is likely to slow in 2010, and reported asset quality remains sound to date, such a rapid expansion gives rise to significant asset quality concerns in the medium term, in Fitch's view. On a global basis, loan to GDP ratios look high in China, Taiwan, Latvia, Estonia and Ukraine relative to sovereign rating levels, while penetration is moderate in Mexico, Peru, Indonesia and Colombia.

Asset quality deterioration has been particularly sharp during the crisis in the CIS and the Baltics, driving large sector losses in 2009 in these markets, with the exception of Russia. Risk charges were also significant in Brazil and Mexico, reflecting a combination of loan impairment, in particular on high-margin/high-loss retail portfolios, and prudent provisioning/write-off policies. However, charges in these two markets were offset by good revenue generation and are expected to moderate in 2010.

Margins remained healthy across LatAm and in Indonesia and Turkey in 2009, while spreads were tighter in CEE and the rest of Asia. Cost/income ratios were globally in the sound 40%-60% range, with lower ratios in LatAm and some CEE markets. Overall, solid 2009 results in Turkey and across LatAm suggest a robustness of banks' business models in these regions, while Asian markets also remained profitable.

Foreign-currency lending is high in many CEE markets, Kazakhstan, Ukraine and Peru, reflecting dependence on cross-border funding and/or high shares of FX deposits, as well as lower FX loan rates. However, FX lending is moderate in Asia and elsewhere in LatAm. Loan/deposits ratios are high across much of CEE and CIS, and at the top end of the scale this is highly correlated with asset quality deterioration during the crisis, with Ukraine, Kazakhstan and the Baltics topping both charts.

Capital ratios are solid in Turkey, Brazil and Indonesia, given quite robust balance sheets in those markets, while Russian banks' significant loss-absorption capacity has helped institutions navigate asset quality problems during the crisis. China, Taiwan and India operate with tighter capital ratios than most other EMs, increasing exposure to any future increase in loan impairment.

State ownership remains considerable in the seven largest EM systems, and this has helped support loan issuance during the crisis in several other markets in addition to China. High foreign ownership in CEE and parts of LatAm may reduce contingent sovereign liabilities, but can also make local economies dependent on parent bank policies.

The full report, entitled 'EM Banking System Datawatch', brings together key sector numbers from 24 emerging markets and is available on Fitch will hold two teleconferences to discuss the findings of the report and the agency's outlook for emerging market banks. Details on the teleconferences and dial-in numbers will be released shortly.

Tesla to export China-made Model 3 vehicles to Europe
Tesla to export China-made Model 3 vehicles to Europe
Georgia reveals volume of external merchandise trade with US
Georgia reveals volume of external merchandise trade with US
EU set to gain WTO clearance for U.S. tariffs next week
EU set to gain WTO clearance for U.S. tariffs next week
Loading Bars
Launch of industry, mining projects to open new job spots in Iran
Armenian PM admits defeat and ready for talks with Azerbaijan on Karabakh
Appeal to be sent to relevant structures due to Armenia’s attacks on civilian population of Azerbaijan
Azerbaijan created conditions for Armenian war prisoners to contact their families
Colliers International: apartment buy/sell deals increasein Tbilisi
Georgia's Batumi sees decrease in real estate transactions
Turkish Trade Ministry says carpet exports to Russia rise
Supplies of Turkish carpets to Italy on decline
Azerbaijani armed forces adequately respond to Armenian side’s provocations
Update given on civilian casualties from Armenian shelling of Azerbaijan's Aghdam
Council of Europe Development Bank talks about projects implemented in Georgia
Dutch manufacturer of equipment for poultry farming eyes to enter Uzbek market
China's exports of flat-rolled products of non-alloy steel to Georgia down
Tesla to export China-made Model 3 vehicles to Europe
Demand for Turkish-made carpets in Kazakhstan up
Kazakhstan to reduce flights on int'l routes to battle COVID-19 spreading
Armenian armed forces shelling Azerbaijani settlements
Turkey records contraction in carpet export to Iran
IMF says economy of oil-exporting countries in Caucasus, Central Asia to decline
Export of Turkmen fabrics from synthetic complex yarns to EAEU increased
Russia hopes on quickly agreed mechanism for monitoring ceasefire in Karabakh - FM
Iran joins global program to pre-purchase Coronavirus vaccine
National Bank of Georgia sells funds at another foreign exchange auction
Georgia increases export of apples
Turkmengas re-opens tender for provision of laboratory testing services
Import of Turkish carpets by Israel drops marginally
Kazakhstan increases imports from Uzbekistan amid COVID-19
Azerbaijan must not leave Karabakh conflict to future generations - assistant to president
Azerbaijani army seizes more military equipment of Armenian armed forces on battlefield (PHOTO)
AzTV channel crew undergo fire from Armenian troops in Azerbaijan's Aghdam (VIDEO)
Iran’s Bahar Azadi gold coin price falling
USAID raises awareness of fruits and vegetables export from Central Asia
E5P, EBRD support Georgian transport sector
Qatar Airways expects to keep A380s parked for years
Georgian hazelnuts exports up as of October 18
Video instructions issued for foreign visitors crossing Azerbaijan's border
Armenian Armed Forces shell cotton factory in Azerbaijan's Tartar
Iran declares value of mobile phone imports
Geostat reveals volume of Russian export to Georgia
Significantly lower prices needed to force OPEC+ cuts
Ten most COVID-impacted countries to cumulatively lose almost $700 billion in real GDP
Armenia grossly violates all laws – Azerbaijani major general
Armenia tries to mislead world community and evade responsibility - Israeli expert
Georgia reveals export statistics of major goods to Russia
Uzbekneftegaz to buy compressor via tender
Iran reveals its trade turnover with Arab countries
Armenia engaged in illegal economic activity in occupied Azerbaijani lands, top official says
Azerbaijani Prosecutor General's Office gives updates on civil casualties, damages
Azerbaijan's banking system has stabilized - MP
BP expresses support for Azerbaijani people in struggle for territorial integrity
It is impossible to find other countries elsewhere in world that would be so close to each other as Turkey and Azerbaijan - President Aliyev
Very good news comes from front every day - President Aliyev
Azerbaijan doesn't target Armenian civilians - assistant to Azerbaijani president
Armenia carrying out acts of terrorism against Azerbaijani civilians at state level - Assistant to president
France lowers import of Turkish-made carpets
Georgian domestic exports down
Azerbaijani MoD shows soldiers who liberated Hadrut from Armenian occupation (PHOTO)
Azerbaijan confirms 107 more COVID-19 recoveries
Armenian missile attack on Ganja - sign of cowardice, says Iranian MP
Speakers of Azerbaijani, Turkish parliaments meet in Baku (PHOTO)
Conflict unleashed by Armenia continues, Armenia continues to attack Azerbaijani civilians, says assistant to Azerbaijani president
Iraq's 9M2020 export of carpets from Turkey rises
Trade turnover between Georgia and Azerbaijan decreases
Armenian “Yerkrapah” Volunteer Union chairman wounded during Karabakh clashes
Turkmenistan increases export of propylene polymer to EAEU member states
Equinor updates on Karabagh, ADUA projects
Georgia slightly increases import of Turkish carpets
Armenian Armed Forces targeted pipelines in Azerbaijan's Khizi district - Prosecutor General's Office
Azerbaijan reveals income from chargeable services for 9M2020
Georgia reveals volume of external merchandise trade with US
Iran reveals its COVID-19 data for October 19
Sale of mineral fertilizers down in Uzbekistan
Shell talks on ensuring cyber security amid digitalization
Azerbaijani PASHA Bank's total assets increase
Azerbaijani Foreign Ministry to send appeals to strengthen protection of Azerbaijani diplomats abroad
Microgreens to appear on Georgian markets
Armenian servicemen wounded in Karabakh battles refusing to get back on battlefield
Turkmenistan, Russia’s Perm Krai talk over potential co-op areas
Shell maintaining optimized asset performance with digitalization
Article covering latest developments within Karabakh conflict published by International Policy Digest
Georgian spring water “Mtis Tskali” to be exported to Azerbaijan and Kazakhstan
UNICEF worried over death of children due to Nagorno-Karabakh conflict
Uzbekistan, UAE to insure export-import transactions between entrepreneurs
First commercial Etihad flight lands in Tel Aviv
EU set to gain WTO clearance for U.S. tariffs next week
Development of securities market in Azerbaijan to be accelerated - expert
Assistant to Azerbaijani president talks Armenia’s latest provocations (VIDEO)
Netanyahu congratulates Azerbaijani people on Independence Day
Kazakhstan’s Atyrau refinery to buy paints via tender
Uzbekistan to reduce labor force for cotton picking via combines
Kazakhstan's import of Belarus-made goods down year-on-year
Uzbek Central Bank reveals new exchange rates
Azerbaijani military's positions in Goygol under fire from Armenian Armed Forces
Azerbaijan's Central Bank holds deposit auction
Armenian Armed Forces fire at Azerbaijani positions on state border - MoD
Iran's raw steel production increases
SOCAR increases LPG exports to Ukraine
Turkish Trade Ministry says carpet exports to Morocco down
Gold, silver prices in Azerbaijan down again
Azerbaijan's non-oil production growing steadily
All news