Fitch: EM Bank Credit Profiles Under Pressure, but Buffers and Support Largely Intact
The impairment of banks' financial metrics in most markets has, so far been limited or manageable despite the more challenging operating conditions, and Fitch expects negative rating actions to be moderate in scope. This reflects banks' significant loss-absorption capacity, our forecasts of still positive economic growth in most EMs and available sovereign support. We continue to view banks in most Latin American and Asian markets, and in South Africa, as relatively resilient, notwithstanding tougher operating conditions.
FX risks are greater in EMEA than other EM regions. Dollarisation ratios are high in Russia, the CIS, Turkey and Nigeria, and local currency depreciation has added to pressure on banks' asset quality and capital. Short-term external debt is an additional risk for Turkish lenders. Polish banks' Swiss franc mortgage books could lead to losses due to possible new legislation, although other CEE lenders are less exposed to FX risks. In Latin America and Asia, FX risks are greatest in Peru and Indonesia, but still more moderate than in EMEA.
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