Global Corporate Default Rates Modest in 2013

Europe's fragile emergence from recession coupled with soft US growth and slowing emerging market activity remained key factors affecting global corporate credit quality in 2013, according to a new Fitch Ratings report. However, macro challenges were balanced by good industrial fundamentals and a calmer operating environment for financial institutions.


The global corporate default rate remained low in 2013 at 0.51%. The emerging market default rate was 1.12% and the developed market rate, 0.26%. In addition, the vast majority of ratings, 81.7%, remained the same in 2013. Downgrades (9.8%) marginally topped upgrades (8.5%).


Rating activity was similar to 2012 across both industrials and financials, with the exception that the share of financial institutions downgraded (8.4%) was down from 12.4% in 2012 and at the lowest level since 2007. Overall, the margin of downgrades to upgrades was 1.3 to 1 across industrials and 1 to 1 across financial institutions in 2013.


Issuer downgrades trailed upgrades for the fourth consecutive year, across emerging markets (0.9 to 1), but by a smaller margin than in 2012 (0.7 to 1). Among advanced economies, downgrades continued to outpace upgrades by 1.3 to 1 in 2013, a modest improvement from 1.6 to 1 in 2012.


By year-end 2013, 'BBB' rated issuers remained more abundant across the mix of global financial and industrial entities - 36% and 43% of outstanding ratings, respectively.


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