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.