Financial Times: European banks lead the way in Q1 ratings upgrades – S&P

22 May 2017

Banks led the way in a positive Q1 for European corporate credit ratings, according to S&P Ratings, as the eurozone’s increasingly robust recovery helped to ease pressures on the sector which has been burdened by low interest rates and large numbers of bad loans left over from the financial crisis.

S&P upgraded European 14 banks during the first three months of the year, out of a total of 34 financial and nonfinancial companies. Deutsche Bank and Commerzbank were among five German groups to be upgraded, just months after Commerzbank was forced to launch a major restructuring programme to boost profits and US misconduct charges sparked fears Deutsche could be left critically short of capital.

Other upgrades reflected the strength of recovery among some of the countries that were most badly affected by the financial crisis. Three of Ireland’s “Big Four” banks were upgraded, along with two Spanish and two Portuguese lenders.

The Irish government was forced to nationalise Permanent TSB and Allied Irish Banks during the financial crisis, as well as rescue Bank of Ireland, but S&P said in a report earlier this year that the sector had since got “back to where [it] once belonged”.

The total of 34 upgrades compared favourably with only 17 downgrades over the quarter, though the outlook for the coming quarters may not be quite as bright: the balance of companies with a negative outlook compared to those with a positive outlook worsened slightly compared to the end of 2016.

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