Baku, Azerbaijan, Feb. 11
By Azad Hasanli - Trend:
In an article published on RatingsDirect, titled "Negatives Tip The Scale For EMEA's Emerging Banking Systems In 2016," Standard & Poor's Ratings Services says it believes this will be a testing year for emerging banking systems in Europe, the Middle East, and Africa (EMEA).
"In our view, the recent oil-price shock, currency risk, and legacy portfolio issues are the key threats for emerging EMEA banking sectors in 2016," said Standard & Poor's credit analyst Natalia Yalovskaya.
"But we also regard political and market uncertainties, among other factors, as latent threats," she said. "We believe banking environments will deteriorate further and therefore foresee risks increasing for banks in 2016."
Sluggish economic growth will likely subdue new banking business and erode asset quality and margins for banks in Russia, Nigeria, Azerbaijan, and Kazakhstan, given these countries' dependence on oil, S&P says.
Although we anticipate some strain on Gulf banks' funding and liquidity this year, good asset quality and strong capitalization remain positive factors.
Furthermore, we foresee adverse operating conditions for Bulgarian, Croatian, and Polish banks, but we believe Czech, Slovak, Slovenian, and Hungarian banks should benefit from the improving economic environment. In Belarus, Ukraine, Georgia, and Turkey, banks remain vulnerable to declining asset quality and higher refinancing risk, due to currency depreciation.
"Generally, we expect that negative rating actions will outweigh positive ones in the region's emerging banking markets," Yalovskaya added.
In fact, we see a positive economic risk trend in only two countries, Hungary and Slovenia.
The report states that country-specific factors also represent a danger for some systems, such as geopolitical uncertainties in Turkey, the ongoing tensions between Russia and the West, and lack of stability in Ukraine.