Presentation is loading. Please wait.

Presentation is loading. Please wait.

Richard Hunter Group Managing Director, Corporates Emerging vs. Developed Markets How Corporates have Fared, and Where are the Real Risks Hiding ICAP Credit.

Published byRoger Jennings Modified over 8 years ago

Similar presentations

Presentation on theme: "Richard Hunter Group Managing Director, Corporates Emerging vs. Developed Markets How Corporates have Fared, and Where are the Real Risks Hiding ICAP Credit."— Presentation transcript:

1 Richard Hunter Group Managing Director, Corporates Emerging vs. Developed Markets How Corporates have Fared, and Where are the Real Risks Hiding ICAP Credit Risk Conference Sofia, Bulgaria December 2, 2010

2 Agenda Emerging Markets vs. Developed Markets Corporates – How Risky? What Next?

3 ICAP Conference, Sofia, December 20102 Fitch View: Decoupling No, Convergence Yes >Gap between developed & emerging market corporates shrinking >Ratings for emerging market corporates have been more resilient >Corporate outlooks (were) stabilising >In weak growth environment, corporates relatively robust… >… But they don’t live in a bubble –2008: Structured Finance –2009: Financial Institutions –2010: Sovereigns –2011: ….?

4 ICAP Conference, Sofia, December 20103 Fitch GDP Forecasts for 2010 Revised Upwards GDP Growth in 2010 in Major Advanced Economies Source: Fitch

5 ICAP Conference, Sofia, December 20104 Fitch GDP Forecasts for 2010 Revised Upwards GDP Growth in 2010 in Brazil, Russia, India, China Source: Fitch

6 ICAP Conference, Sofia, December 20105 Fitch GDP Forecasts for 2010 Revised Upwards GDP Growth in 2010 in Convergence Countries Source: Fitch

7 ICAP Conference, Sofia, December 20106 Fiscal Stimulus Starts to be Withdrawn Next Year General Government Balance (% GDP) Source: Fitch

8 ICAP Conference, Sofia, December 20107 No Decoupling, But Shift in Credit Quality Source: IMF WEO GDP Growth, %

9 ICAP Conference, Sofia, December 20108 Central & Eastern Europe in Context Fitch View on GDP GrowthFitch View on Deficit/GDP Source: Fitch Sovereign Comparator CEE – Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia

10 ICAP Conference, Sofia, December 20109 Rating Impact Bank Individual Ratings 2007-2010 Simple Average by Issuer Count, not Asset-Weighted Source: Fitch

11 ICAP Conference, Sofia, December 201010 Fitch Bank Individual Ratings, 2007-2010 Developed MarketsEmerging Markets Unweighted Issuer Count Source: Fitch Unweighted Issuer Count Source: Fitch

12 ICAP Conference, Sofia, December 201011 Fitch Bank Individual Ratings, 2007-2010 Developed MarketsEmerging Markets Unweighted Issuer Count Source: Fitch Unweighted Issuer Count Source: Fitch Major Bulgarian Banks

13 ICAP Conference, Sofia, December 201012 Outlooks Leading Rating Actions Net Rating Changes versus Net Outlook/Watch Changes Source: Fitch Outlook stabilisation starts, June ‘09 Rating stabilisation starts, Dec ‘09

14 ICAP Conference, Sofia, December 201013 Corporate Downgrade Actions, 2008-2010 Developed MarketsEmerging Markets Europe, Middle East, Africa, Asia Source: Fitch Europe, Middle East, Africa, Asia Source: Fitch

15 ICAP Conference, Sofia, December 201014 Negative Outlooks – What Happened Next? Developed MarketsEmerging Markets Europe, Middle East, Africa, Asia Source: Fitch Europe, Middle East, Africa, Asia Source: Fitch

16 ICAP Conference, Sofia, December 201015 Negative Outlooks – What Happened Next? Cyclical SectorsNon-Cyclical Sectors Europe, Middle East, Africa, Asia Source: Fitch Europe, Middle East, Africa, Asia Source: Fitch

17 ICAP Conference, Sofia, December 201016 Quality of Issuance Emerging MarketsHigh Yield (Dev. Mkt. <BBB) Europe, Middle East, Africa, Asia Source: Fitch Europe, Middle East, Africa, Asia Source: Fitch

18 ICAP Conference, Sofia, December 201017 Directional Fitch Rating Outlooks, 2006-2010 Corporate Issuer Default Ratings Source: Fitch Global DevelopedEmerging EMEA Global Emerging

19 Agenda Emerging Markets vs. Developed Markets Corporates – How Risky? What Next?

20 ICAP Conference, Sofia, December 201019 Fitch Forecasts 2009 to 2011 Sub-Sectors by Cumulative EBITDA Movement 2007 A – 2011 E Source: Forecasting EMEA Corporates' Recovery, December 2009

21 ICAP Conference, Sofia, December 201020 USDbn2007200820092010f2011f Revenue5,2575,8955,4155,8276,124 OCF9981,0571,0831,0591,142 Capex454544515525538 FCF80-26225392 Corporate Europe’s Future – in Aggregate Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

22 ICAP Conference, Sofia, December 201021 Where Next?

23 ICAP Conference, Sofia, December 201022 Fitch Corporate Forecasts 2009 – Not the Massive Correction Expected? Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

24 ICAP Conference, Sofia, December 201023 Fitch Corporate Forecasts … But Energy & Utilities predominate in top-line increases Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

25 ICAP Conference, Sofia, December 201024 Fitch Corporate Forecasts … Free Cash Flow Recovers to 2007 Levels… Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

26 ICAP Conference, Sofia, December 201025 Fitch Corporate Forecasts … But Again Energy & Utilities are Key… Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

27 ICAP Conference, Sofia, December 201026 Net Results: Leverage Non-Critical Rise – Less than One Turn of Cash Flow Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

28 ICAP Conference, Sofia, December 201027 Net Results: Leverage … Pressure Points on Consumer and Energy/Utilities… Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

29 ICAP Conference, Sofia, December 201028 Net Results: Interest Cover In Aggregate, Sustainable and Comfortable Levels Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

30 ICAP Conference, Sofia, December 201029 Net Results: Interest Cover Add Another 200bps of Funding Cost? Representative sample of Fitch rated universe in EMEA Source: Company financials; Fitch forecasts Clear Thinking

31 ICAP Conference, Sofia, December 201030 Where Are the Real Risks? Developed EMEA vs. Emerging EMEA Growth rates in constant USD terms Source: Fitch forecasts 5% 7% 9% Clear Thinking

32 ICAP Conference, Sofia, December 201031 Where Are the Real Risks? Industrials Developed EMEAEmerging EMEA Fitch forecasts as at 1.04.10 Source: Fitch Fitch forecasts as at 1.04.10 Source: Fitch 5% 13% 11% 17%

33 ICAP Conference, Sofia, December 201032 Where Are the Real Risks? Telecom/Media/Tech Developed EMEAEmerging EMEA Fitch forecasts as at 1.04.10 Source: Fitch Fitch forecasts as at 1.04.10 Source: Fitch 2% 2.5% 6% 5%

34 ICAP Conference, Sofia, December 201033 Where Are the Real Risks? Energy & Utilities Developed EMEAEmerging EMEA Fitch forecasts as at 1.04.10 Source: Fitch Fitch forecasts as at 1.04.10 Source: Fitch 5% 8% 6% 8%

35 Agenda Emerging Markets vs. Developed Markets Corporates – How Risky? What Next?

36 ICAP Conference, Sofia, December 201035 End of the “Risk Trade”? Investor Need for Yield Resurgent Consumption Where Did the Leverage Go? Liquidity “Bubble” forming for Corporates Capacity Gap, depressing Business Investment 2010 11

37 ICAP Conference, Sofia, December 201036 Other Fitch Concerns? >Consumer Confidence >“Zombies!” >Commodities – Long-run Up, Short-run Down >Policymaker Shuffle >“Crowding Out” of Corporate Debt >Reliance on Banks

38 ICAP Conference, Sofia, December 201037 Bond Markets – Getting a Rating >CRAs place a high value on trustworthiness of responses –Opacity (public or private) is penalised by committees –A genuine “Don’t Know” is better than a bluff >Nobody likes surprises –CRAs operate with confidentiality undertakings –“Bad news is best served warm” –Don’t turn a good surprise into a bad one >Admit mistakes –People who never make mistakes never learn –Admission shows thoughtfulness and readiness to respond –Explain the problem - and your remedy Clear Thinking

39 ICAP Conference, Sofia, December 201038 We Live in the Future, not the Past >CRAs are more forward-looking, respond to that –Discuss forecasts with CRAs as freely as you can –Detail on your assumptions will be impressive –Don’t expect your forecasts to be adopted by the CRA –But do ask the CRA where their forecasts came out >Talk frankly about your position –Feel free to discuss your peer group - but avoid insults! –Admission of weaknesses displays candour –Rating committees will focus on your challenges >So should your discussion with the CRA Clear Thinking

40 ICAP Conference, Sofia, December 201039 “ClearThinking” >New research initiative >Each issuer report carries a peer study and a selection of forecast information >New, transparent criteria reports by sub-sector and region >Visit our microsite for more information > clearthinking.fitchratings.co.uk

41 ICAP Conference, Sofia, December 201040 New Criteria Format

42 ICAP Conference, Sofia, December 201041 Example – Virgin Media

43 ICAP Conference, Sofia, December 201042 Issuer Reports Key financial and operational metrics Historical and prospective comparisons against sector and rating medians Prospective cashflow-based ratios based on Fitch internal forecasts, to provide an indication of expected trend Context and key assumptions explained

44 The Fitch GroupFitch RatingsAlgorithmicsFitch Solutions Fitch Ratings www.fitchratings.com London 101 Finsbury Pavement London EC2A 1RS +44 20 7417 4222 New York One State Street Plaza New York, NY 10004 +1 212 908 0500 +1 800 75 FITCH Singapore 7 Temasek Blvd. Singapore 038987 +65 6336 6801

Download ppt "Richard Hunter Group Managing Director, Corporates Emerging vs. Developed Markets How Corporates have Fared, and Where are the Real Risks Hiding ICAP Credit."

Similar presentations

6 th ALB National Conference Two years of crisis Dynamic and diagnosis of consumer credit in Romania versus Europe Gilles Zeitoun – Cetelem IFN Bucarest.

6 th ALB National Conference Two years of crisis Dynamic and diagnosis of consumer credit in Romania versus Europe Gilles Zeitoun – Cetelem IFN Bucarest.
1 The Global Financial Crisis: What’s Next? Bank Guarantee Fund Conference Warsaw, May 21, 2010 Mark Allen Senior IMF Resident Representative for Central.

1 The Global Financial Crisis: What’s Next? Bank Guarantee Fund Conference Warsaw, May 21, 2010 Mark Allen Senior IMF Resident Representative for Central.
Global Economic and Financial Prospects and Risks: 2006 Robert F. Wescott, Ph.D. Rome 5 December 2005.

Global Economic and Financial Prospects and Risks: 2006 Robert F. Wescott, Ph.D. Rome 5 December 2005.
December 2010 Economic Overview and Outlook Scottish Supply Chain Conference September 2012 Kenny Richmond Scottish Enterprise.

December 2010 Economic Overview and Outlook Scottish Supply Chain Conference September 2012 Kenny Richmond Scottish Enterprise.
Mobilizing international resources for development: Foreign direct investment and other private flows Mansoor Dailami New York February 15th, 2008 Manager,

Mobilizing international resources for development: Foreign direct investment and other private flows Mansoor Dailami New York February 15th, 2008 Manager,
© 2014 IHS Global Consumer Markets Outlook. © 2014 IHS A gradual acceleration in the global economy Led by the United States, global growth is picking.

© 2014 IHS Global Consumer Markets Outlook. © 2014 IHS A gradual acceleration in the global economy Led by the United States, global growth is picking.
Brazil Oil & Gas Growth prospects and new regulation José Luis Villanueva, Director Brazil Energy Conference Brazilian-American Chamber of Commerce.

Brazil Oil & Gas Growth prospects and new regulation José Luis Villanueva, Director Brazil Energy Conference Brazilian-American Chamber of Commerce.
January 2013 Going global in fixed income. Agenda Going global in fixed income China – another debt bubble in the making? M&G Global Macro Bond Fund The.

January 2013 Going global in fixed income. Agenda Going global in fixed income China – another debt bubble in the making? M&G Global Macro Bond Fund The.
Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia.

Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia.
1 FDI Confidence Index ® 2003 FDI Confidence Index ® The Global Business Policy Council Press Slides September 2003.

1 FDI Confidence Index ® 2003 FDI Confidence Index ® The Global Business Policy Council Press Slides September 2003.
Vendor finance Perspective of equipment manufacturer Tom Olszewski Terex Financial Services.

Vendor finance Perspective of equipment manufacturer Tom Olszewski Terex Financial Services.
Lecture 3: Emerging Markets and Elements of Country Risk Analysis.

Lecture 3: Emerging Markets and Elements of Country Risk Analysis.
Europe and Central Asia Region

Europe and Central Asia Region
CAIJING ANNUAL CONFERENCE 2009 Forecasts and Strategies Beijing December 12, 2008.

CAIJING ANNUAL CONFERENCE 2009 Forecasts and Strategies Beijing December 12, 2008.
Future Financial Forecast An update on the big economic picture for credit, interest rates and inflation. Paul Cahill Chief Executive Officer.

Future Financial Forecast An update on the big economic picture for credit, interest rates and inflation. Paul Cahill Chief Executive Officer.
The Dawn of a New Economic Era? Russia Economic Report April 2015 | Edition No. 33.

The Dawn of a New Economic Era? Russia Economic Report April 2015 | Edition No. 33.
Business Optimism Index Kuwait Q3 2009 Presented by Dun & Bradstreet South Asia Middle East Ltd (D&B) Muthanna Investment Company (MIC)

Business Optimism Index Kuwait Q Presented by Dun & Bradstreet South Asia Middle East Ltd (D&B) Muthanna Investment Company (MIC)
August 2003 Investor Relations Online and Surveys of Reporting on Corporate Social Responsibility (CSR) in 11 Central and Eastern European (CEE) Countries,

August 2003 Investor Relations Online and Surveys of Reporting on Corporate Social Responsibility (CSR) in 11 Central and Eastern European (CEE) Countries,
Emerging Market Economies: Does this classification still make sense?

Emerging Market Economies: Does this classification still make sense?
ASEAN Beyond the Crisis: Prospects and Challenges of Recovery Aladdin D. Rillo Head, Finance Integration Division The ASEAN Secretariat Regional Conference.

ASEAN Beyond the Crisis: Prospects and Challenges of Recovery Aladdin D. Rillo Head, Finance Integration Division The ASEAN Secretariat Regional Conference.

Similar presentations

Ads by Google