Baku, November 17 (AZERTAC). US banks face a "serious risk" that their creditworthiness will deteriorate if Europe`s debt crisis worsens, Fitch Ratings said.

"Fitch believes that unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the US banking industry could worsen," the New York-based rating company said today in a statement.

Banks in the US have manageable exposure tied to stress European markets in Greece, Ireland, Italy, Portugal and Spain, "but further contagion poses a serious risk," Fitch said. Gross exposures to larger European countries and major banks are greater than those of the five stressed countries, the rating firm said. It didn`t explain what it meant by contagion.

The six largest US banks had $US50 billion in aggregate exposure to the five stressed countries at the end of the third quarter, Fitch said in the report. So-called cross-border outstandings to France were $US188 billion for the top five US banks, according to Fitch.

On October 13, Fitch placed debt ratings of seven global banks with large trading operations on negative watch.

Besides Goldman and Morgan Stanley, the group includes European companies Barclays Bank Plc, BNP Paribas, Credit Suisse, Deutsche Bank and Societe Generale.

US banks have increased their trading operations in Europe in the past several years, while reducing their traditional lending operations, said Christopher Wolfe, one of the Fitch analysts who wrote the report. A lingering debt problem could affect bank`s capital market revenue since about one-third of it comes from European counterparties, he said.

Contagion from Europe also could impact the banks` access to funding, he said.

US banks appear to have managed their exposure to the most troubled "peripheral" European nations such as Greece and Ireland, said Joseph Scott, another author of the Fitch report, but Fitch fears that the problems now spreading to Italy could reach further into larger nations such as France and Germany where the US banks are more exposed.

"Our concern is with counterparty risk, the impact of Europe on global economic growth and how that weighs on the economic recovery in the US," said Joseph Scott, one of the analysts who wrote the Fitch report.

The analysts don`t expect a resolution of the issues for another 12 months or so, and are unlikely to adjust their outlook on the sector quickly. "This is going to have a prolonged and uncertain income," Scott said.

US banks haven`t clearly disclosed the extent of their holdings of European sovereign debt or their trading positions with European counterparties, but have been reducing their direct exposure for well over a year, the report said. While net exposure appears manageable, the analysts expressed concern over the efficacy of hedges through credit default swaps.