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Fitch: Stable Outlook for Global Trading and Universal Bank Sector
December 13, 2016 / 10:24 PM / a year ago

Fitch: Stable Outlook for Global Trading and Universal Bank Sector

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2017 Outlook: Global Trading and Universal Banks (Diverging Fortunes in Difficult Operating Environment) here LONDON, December 13 (Fitch) Fitch Ratings says that the sector outlook for the Global Trading and Universal Banks (GTUBs) is stable. We expect earnings will remain under pressure, but prospects for asset quality, capitalisation, funding and liquidity to remain good. We expect the banks with the strongest client franchises and with geographic and product diversification to perform best. The banks that are still adapting business models will be more challenged to implement strategies in a difficult environment. We expect revenue generation to remain difficult in 2017. Low interest rates have made traditional retail banking less profitable and are squeezing margins on wealth and asset management. Expected increases in interest rates in the US should provide some relief, but the short-term impact on earnings is likely to be only moderate. Periods of market volatility, which are probable given the global political climate, could result in higher trading volumes, but we expect cautious investor sentiment will continue to dampen sales and trading activity. Fitch believes that non-performing assets in most of the regions where the GTUBs operate have reached a cyclical low and expects some deterioration in asset quality in 2017. Given our economic growth forecast, increases in non-performing assets should remain modest and rising impairment charges should remain manageable. Following a peer review on 13 December, Fitch has affirmed the Long-Term Issuer Default Ratings (IDRs) and Viability Ratings (VRs) of the following 11 GTUBs: Bank of America Corporation (A/Stable/a), Barclays plc (A/Stable/a), BNP Paribas (A+/Stable/a+), Citigroup Inc. (A/Stable/a), Credit Suisse Group AG (A-/Stable/a-), The Goldman Sachs Group, Inc. (A/Stable/a), HSBC Holdings plc (AA-/Stable/aa-), JPMorgan Chase & Co. (A+/Stable/a+), Morgan Stanley (A/Stable/a), Societe Generale (A/Stable/a) and UBS Group AG (A/Positive/a). Deutsche Bank AG's A- Long-Term IDR and a- VR were maintained on Rating Watch Negative following the review. During the peer review, Fitch assigned Derivative Counterparty Ratings (DCRs) to the GTUBs' entities that are significant derivative counterparties as part of its roll out of DCRs to significant derivative counterparties in western Europe and the US. DCRs were introduced in our July 2016 Global Bank Rating Criteria. Assigned on the 'AAA' scale, DCRs are a product of developments in bank resolution frameworks that mean different types of banks' senior creditors may be treated more or less favourably relative to one another. DCRs are issuer ratings and express Fitch's view on banks' relative vulnerability to default. This relates to the highest-risk type of derivative contracts with third-party, non-government counterparties, which we assume (either jointly or in isolation) will be an uncollateralised derivative exposure. Fitch's '2017 Outlook: Global Trading and Universal Banks' is available at or by clicking on the link above. Fitch has also published Rating Action Commentaries for each bank in the peer group, which are available on These include each issuer's key rating drivers and rating sensitivities and lists of all rating actions taken. Contact: Christian Scarafia Senior Director +44 20 3530 1012 Fitch Ratings Limited 30 North Colonnade London E14 5GN Meghan Neenan Senior Director +1 212 908 9121 Bridget Gandy Managing Director +44 20 3530 1095 Joo-Yung Lee Managing Director +1 212 908 0560 Additional information is available at ''. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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