Fitch's Inside Credit: ECB's QE Program and Semi-Annual Credit Outlook in Focus

The latest edition of Fitch Ratings' 'Inside Credit' newsletter focuses on the impact of the ECB's quantitative easing program on bank loan growth, and the results of Fitch's semi-annual credit outlook.

The ECB's quantitative easing program may reduce banks' downside risk from prolonged deflation if not materially boost eurozone banks' earnings or kick-start lending in the bloc. Fitch believes any improvements will likely be temporary unless bank balance sheets are freed up for more lending or structural reforms raise real and sustainable economic growth.

'We think QE is unlikely to stimulate lending in the eurozone's crisis-hit economies, despite the start of rebalancing and recovery in some countries,' says Bridget Gandy, Managing Director, Financial Institutions. 'The economic outlook is still fragile, so demand for credit is likely to remain subdued, and tighter regulatory requirements are making loan growth more difficult for banks.'

'Inside Credit' also highlights Fitch's first Credit Outlook of the year, which showed stabilized Rating Outlooks across most sectors in 2014, led by sovereigns. Financial Institutions were the exception to this trend, as lower sovereign support for banks is expected to drive downgrades in the first half of 2015.

'Global growth will be driven by a buoyant U.S. economy in 2015, offsetting weaker growth in the eurozone, Japan and many large emerging markets including Brazil, China and Russia,' said Monica Insoll, Managing Director, Credit Market Research. 'This year, ratings risks will likely come from M&A activity and geopolitical events.'

Other topics covered in this week's edition of Inside Credit include:

-CLO management expansion requires more investor scrutiny

-U.S. high yield default rate stays below average

-What could drive negative European MMF yields?

-Broadening Spanish recovery

-Earnings mixed for big U.S. banks; Eyes on oil, rates

-What supports Canadian banks' high ratings?

-Saudi succession smooth; Oil price and response in focus

-Race between reform and systemic risks in China

'Inside Credit' is a weekly snapshot of Fitch Ratings' noteworthy content, selected from all sectors and regions. To receive the weekly edition, distributed every Friday at 8am ET, please sign up here: http://pages.fitchemail.fitchratings.com/InsideCreditSignUp/

Additional information is available at 'www.fitchratings.com'.

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