Fitch Ratings reduced its outlook for Česká spořitelna and Komerční banka to “Negative” in light of the coronavirus outbreak in Europe and the economic disruption that it’s caused. However, the ratings agency left the banks’ overall rating a “A”. Fitch warned that it expects there to be a sharp economic slowdown in the Czech Republic as well as its trading partners in 2020. “We expect Česka’s and Komerční’s loan performance to weaken relative to our previous expectations and earnings challenges to intensify due to weaker business volumes and rising loan impairment charges,” wrote Fitch. “However, this is unlikely to put significant pressure on capital, at least in the near term, due to sizable buffers and limited expected loan growth. The banks are primarily funded by granular domestic deposits, which have been stable to date.” The ratings agency noted that both banks were strong enough of in their own market to carry a higher rating than that of their parent companies.
