Fitch Ratings has affirmed Japan’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘A+’ with a Negative Outlook. The Short-term IDR has been affirmed at ‘F1+’. The Country Ceiling has been affirmed at ‘AA+’.

The affirmation of Japan’s sovereign ratings in part reflects the greater commitment of the Bank of Japan and government to bring to an end two decades of economic stagnation and deflation. If successful and underpinned by structural reform to raise potential growth along with a credible medium-term deficit reduction plan, Japan’s adverse public debt dynamics could be corrected. The Negative Outlook reflects the uncertainty over the success of these efforts to shift the economy onto a more positive real and nominal growth path as well as the absence of more detailed reform and fiscal consolidation programme.

KEY RATING DRIVERS

The affirmation of the ratings with Negative Outlooks reflects the following key factors: >> Read More

Obviously with Buffett a major shareholder of Moody’s, the only place where a downgrade of Berkshire could come from was S&P. Moments ago, the rating agency that dared to downgrade the US for which it is being targeted by Eric Holder’s Department of “Justice”, did just that.

On New Criteria, Berkshire Hathaway Inc. Downgraded To ‘AA’, Core Ins. Subs Affirmed At ‘AA+’, Senior Debt Rated ‘AA’

Overview

• Under our revised group methodology criteria, we are lowering our counterparty credit rating on BRK to ‘AA’ from ‘AA+’. At the same time, we are affirming our ‘AA+’ counterparty credit and financial strength ratings on BRK’s core operating insurance companies.
• The ratings reflect our view of the group’s excellent business risk profile and very strong financial risk profile based on an extremely strong competitive position and very strong capital and earnings.
• The negative outlook reflects the U.S. sovereign ratings cap and our view that the group’s capital adequacy per our capital adequacy model could deteriorate relative to its risk profile.

Rating Action

On May 16, 2013, Standard & Poor’s Ratings Services lowered its counterparty  credit rating on Berkshire Hathaway Inc. (NYSE:BRK; AA/Negative/A-1+) by one  notch to ‘AA’ from ‘AA+’ and affirmed its ‘AA+’ insurance financial strength  ratings on BRK’s core subsidiaries following release of our revised Insurers  Rating and Group Rating Methodology, released on May 7, 2013. The outlook on all ratings is negative. At the same time, we assigned our ‘AA’ senior debt rating to Berkshire Hathaway Finance Corp.’s (BHFC) $1.0 billion senior 
unsecured notes. BHFC has issued the notes in two tranches: $500 million 1.3% senior unsecured notes due May 15, 2018, and $500 million 4.3% senior unsecured notes due May 15, 2043. The company used the proceeds of this issue to repay $1.0 billion of senior notes maturing on May 15, 2013. >> Read More

 Fitch Ratings has upgraded Greece’s Long-term foreign and local currency IDRs to ‘B-’ from ‘CCC’. The Short-term foreign currency IDR has also been upgraded to ‘B’ from ‘C’ and the Country Ceiling upgraded to ‘B’ from ‘B-’. The Outlook on the Long-term IDRs is Stable.

KEY RATING DRIVERS
The upgrade of Greece’s sovereign ratings by one notch to ‘B-’ reflects the following factors:

The Greek economy is rebalancing: clear progress has been made towards eliminating twin fiscal and current account deficits and ‘internal devaluation’ has at last begun to take hold. The price has been high in terms of lost output and rising unemployment and the capacity for recovery is still in doubt. Nonetheless, sovereign debt relief and an easing of fiscal targets have lifted Central Bank measures of economic sentiment to a three-year high and the risk of eurozone exit has receded.

The Economic Adjustment Programme (EAP) is on track amid a semblance of political and social stability. The current administration has displayed much greater ownership of the EU-IMF funded EAP than its predecessors, committing to further upfront fiscal consolidation and a renewed push on structural reforms. Still, tangible economic recovery remains elusive, while resistance to reform is high, underlining the continuing risks to implementation.

Greek primary fiscal adjustment of over 9% of GDP in 2009-12 (excluding one-off support to the financial sector), and around 16% in cyclically adjusted terms, ranks as the most ambitious instance of fiscal consolidation among advanced economies in recent times. The current account deficit has also shrunk from 10% of GDP in 2011 to 3% in 2012. The revised EU-IMF programme gives Greece two additional years (2015-16) to attain a primary surplus of 4.5% of GDP. This relaxation is reflected in Fitch’s expectation of a milder economic contraction of around 4.3% in 2013 (-6.4% in 2012) and a weak recovery in 2014.

Structural reforms are progressing. The financial system has stabilised: EUR16bn-EUR17bn of time deposits have returned to the system since mid-2012 and bank recapitalisation is well advanced. Meanwhile, a small, but significant milestone was passed earlier this month with the completion of the first major privatisation since the EAP began. Considerable progress has also been made with labour market reforms and 80% of the earlier loss of competitiveness has been clawed back. However, product market reform remains a major challenge: progress in this area will be important to support a sustainable recovery and for the success of the EAP. >> Read More

Fitch Ratings-London-24 April 2013: Fitch Ratings has downgraded the Bank of England’s (BoE) Long-term Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’ following the downgrade of the UK sovereign rating on 19 April 2012. The senior unsecured Short-term rating has been affirmed at ‘F1+’. The Outlook is Stable.

KEY RATING DRIVERS 
BoE’s Long-Term IDR is directly aligned with that of the UK government. The BoE is the monetary arm of the UK sovereign and as such its credit profile is aligned with that of the sovereign government.

While central banks have unlimited capacity to create base money, in practice the net present value of seigniorage, the profit from money creation, is limited and typically channelled to the government. This reinforces the close link between the central bank and the sovereign ratings. The monetary financing flexibility and the international reserve currency status of the sterling are already reflected in the UK’s sovereign ratings. >> Read More

Fitch Ratings has downgraded the United Kingdom’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA+’ from ‘AAA’. The Outlook is Stable. At the same time, the agency has affirmed the UK’s Short-term foreign currency rating at ‘F1+’ and the Country Ceiling at ‘AAA’.

The rating actions follow the conclusion of the review of the UK’s sovereign ratings initiated on 22 March and resolve the Rating Watch Negative. The previous Negative Outlook on the UK’s sovereign ratings had been in place since 14 March 2012.

KEY RATING DRIVERS
The downgrade of the UK’s sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch’s medium-term projections for UK budget deficits and government debt. Despite the loss of its ‘AAA’ status, the UK’s extremely strong credit profile is reflected in its ‘AA+’ rating and the Stable Outlook.

- Fitch now forecasts that general government gross debt (GGGD) will peak at 101% of GDP in 2015-16 (equivalent to 86% of GDP for public sector net debt, PSND) and will only gradually decline from 2017-18. This compares with Fitch’s previous projection for GGGD peaking at 97% and declining from 2016-17 and the ‘AAA’ median of around 50%. >> Read More

Fitch Ratings-London-22 March 2013: Fitch Ratings has placed the United Kingdom’s (UK) ‘AAA’ Long-term Issuer Default Ratings (IDR) on Rating Watch Negative (RWN) indicating a heightened probability of a downgrade in the near term. Fitch expects to complete its review of the UK’s sovereign ratings by the end of April. The UK’s Short-term IDR of ‘F1+’ and Country Ceiling of ‘AAA’ are unaffected.

The RWN reflect the latest economic and fiscal forecasts published by the Office for Budget Responsibility (OBR) that indicate that UK government debt will peak later and at a higher level than previously expected by Fitch. General government gross debt (GGGD) and public sector net debt are forecast by the OBR to peak in 2016-17 at 100.8% and 85.6% of GDP and only begin to decline in 2017-18. Fitch has previously stated that GGGD failing to stabilise below 100% of GDP and on a firm downward path towards 90% over the medium term would likely result in a downgrade of the UK’s sovereign ratings.

KEY RATING DRIVERS  >> Read More

• In our opinion, recent changes to the functioning of certain oversight institutions may further undermine Hungary’s institutional effectiveness.
• We are revising our outlook on our ‘BB’ long-term sovereign credit rating on Hungary to negative from stable and affirming the ‘BB/B’ long- and short-term sovereign ratings on Hungary.
• The negative outlook indicates the potential for a downgrade if a deterioration of Hungary’s policy framework weakens confidence and medium-term economic growth prospects, or significantly raises financing costs and leaves Hungary exposed to diminished capital inflows.
• We are also revising to negative from stable our outlooks on the ‘BB’ long-term issuer credit ratings on the National Bank of Hungary. >> Read More

 The economic support for India’s sovereign ratings has weakened “somewhat” given the sluggish growth in Asia’s third largest economy, Kim Eng Tan, senior director of Asia-Pacific Sovereign Ratings at Standard & Poor’s said in a webcast on Friday.

Tan also said the recently unveiled government budget showed “ fiscal prudence“, but higher spending targets posed a risk, in comments similar to its report last month.

India’s economic expansion has slowed dramatically from more than 9 per cent in early 2011 to just 4.5 per cent in the October-December quarter of 2012. >> Read More

The France-based ratings agency has just joined China’s Dagong, and US Moody’s by Fitch-slapping Italy with a BBB ratings handle. Citing four main reasons: election results which and ‘non-conducive’ for further structural reforms, deeper than expected recession, greater than expected budget deficits, and a weak government less able to respond to shocks. But apart from all that, as we noted earlier, Italian stocks and bonds are bid.

 Via Fitch:

FITCH DOWNGRADES ITALY TO ‘BBB+’; OUTLOOK NEGATIVE

Fitch Ratings-London-08 March 2013: Fitch Ratings has downgraded Italy’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘BBB+’ from ‘A-’. The Outlook on the Long-term IDRs is Negative. Fitch has simultaneously affirmed the Short-term foreign currency IDR at ‘F2′ and the common eurozone Country Ceiling for Italy at ‘AAA’.

KEY RATING DRIVERS

The downgrade of Italy’s sovereign ratings reflects the following key rating factors:

• The inconclusive results of the Italian parliamentary elections on 24-25 February make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.
• Q412 data confirms that the ongoing recession in Italy is one of the deepest in Europe. The unfavourable starting position and some recent developments, like the unexpected fall in employment and persistently weak sentiment indicators, increase the risk of a more protracted and deeper recession than previously expected. Fitch expects a GDP contraction of 1.8% in 2013, due largely to the carry-over from the 2.4% contraction in 2012.
• Due to the deeper recession and its adverse impact on headline budget deficit, the gross general government debt (GGGD) will peak in 2013 at close to 130% of GDP compared with Fitch’s estimate of 125% in mid-2012, even assuming an unchanged underlying fiscal stance.
• A weak government could be slower and less able to respond to domestic or external economic shocks. >> Read More

The global rating agency Standard and Poor’s today said the factors constraining the asset quality of banks in Asia Pacific region including India will persist in 2013.

The region’s economy is likely to show a moderate recovery in 2013 after a sharp drop in growth in 2012, but some headwinds in the global economy, such as negative GDP growth in the eurozone, will continue to weigh on growth in Asia-Pacific.

Some of the more debt-laden corporate and household sectors in the region remain susceptible to external shocks, the report said. Outlook on ratings on half of the banks in Japan and all the banks in India are negative, reflecting negative outlook on these sovereign ratings, S&P said.

The other sovereign rating agencies in the region have stable outlooks. >> Read More