The economic pressures resulting from the spread of the coronavirus and the lower oil price are credit negative for banks in Russia and neighbouring markets, and could result in negative rating actions, Fitch Ratings says.
Fitch has revised banking sector outlooks to negative for seven of the eight markets it covers in the region – Russia, Ukraine, Kazakhstan, Armenia, Azerbaijan, Belarus and Georgia.
The banking sector outlook for Uzbekistan remains stable.
The degree of pressure on banks will depend on the extent and duration of economic slowdowns, the specific exposures of national economies and external finances (for example to lower oil prices, tourism revenues or remittances), the policy responses of national authorities, and individual banks’ business profiles, risk exposures and financial metrics going into the slowdown.
Whether this pressure translates into negative rating actions will also depend on the availability of state or shareholder support – which underpins most bank ratings in some markets – the robustness of individual banks’ ratings at their current levels, and the specific rating category.
The stable sector outlook in Uzbekistan reflects the predominance of state-owned companies in loan portfolios and of state-owned lenders in the banking system, and Fitch’s expectation of continued government support for these entities.