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���������ֳ�-London-26 July 2024: EMEA trade-finance banks are likely to report resilient operating performance in 2024 despite geopolitical tensions that could disrupt trade, ���������ֳ� says. We expect performance to benefit from increasing business volumes as global economic growth strengthens due to interest rate cuts. Good control over operating expenses and contained loan impairment charges should support performance.

However, the widespread geopolitical tensions and policy uncertainty create risks for our base-case expectations. Conflict in the Middle East and tensions elsewhere could lead to trade fragmentation, with exports and imports reorienting along geopolitical lines. Rising protectionism is another risk that could be influenced by the outcome of elections this year in several major countries.

The six ���������ֳ�-rated EMEA trade-finance banks have improved their rating headroom over the past twelve months. However, their ability to withstand geopolitical tensions and the still-challenging economic environment varies, with headroom weaker for the lower-rated banks.

We expect the banks’ asset quality to deteriorate in 2024, but only slightly. Their predominant exposures are to medium-sized and large corporates, which have more resilient credit profiles than SMEs. Risks to asset quality are also limited by the short-term maturities of trade finance and factoring businesses, and the banks’ tightened underwriting standards in recent years, including stronger documentary checks.

Our base case does not factor in the possibility of a stress scenario that triggers unexpectedly large defaults. A significant increase in loan impairment charges leading to weakened internal capital generation or, in the most adverse scenarios, capital erosion, could put pressure on some of the banks’ ratings.

The banks’ operating performance improved in 2023, driven by transaction values that benefitted from still-high commodity prices, and, to a lesser extent, by high interest rates. Performance was also boosted by a significant decrease in the cost of risk, reflecting the banks’ reduced stocks of impaired assets and their good control over new non-performing exposures. Capital metrics generally improved, helped by organic capital generation, while funding and liquidity remained a relative credit strength.

���������ֳ�’s recent sector review led to five rating affirmations, including one with an Outlook revision to Positive. In one case, no rating action was taken as the rating had been affirmed shortly before and was unaffected by this latest review. For details, see the Rating Action Commentaries below.

���������ֳ� Affirms Arap Turk Bankasi at ‘B-’, Outlook Positive
���������ֳ� Affirms BCP at ‘BBB-’; Outlook Stable
���������ֳ� Revises FIMBank’s Outlook to Positive; Affirms IDR at ‘B’
���������ֳ� Affirms Banca UBAE at ‘B+’; Outlook Stable
���������ֳ� Affirms UBAF’s IDR at ‘A-’/Stable; VR at ‘bb-’
���������ֳ� Affirms Credit Europe Bank at ‘BB-’; Assigns Credit Europe Group ‘BB-’; Outlooks Positive

Contacts:

Gianluca Romeo
Director – Financial Institutions – Banks

+39 02 9475 6214

���������ֳ� Ireland Limited Sede Secondaria Italiana
Via Morigi, 6 - Ingresso Via Privata Maria Teresa, 8
20123 Milan

Sixte de Monteynard
Associate Director – Financial Institutions – Banks

+31 1 44 29 92 82

David Prowse
Senior Director, ���������ֳ� Wire

+44 20 3530 1250


Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@thefitchgroup.com