The Fitch ratings agency on Thursday affirmed the credit ratings of Israel's three leading banks but warned about high levels of unreserved, non-performing loans and weak capital ratios, which could result in downward rating pressure. "Although the performance of Israeli banks is improving strongly in a more favorable operating environment, Fitch remains concerned about the level of unreserved non-performing loans and weak capital ratios, particularly when compared to international standards," Martin Oldham, director of Fitch's Financial Institutions group, told The Jerusalem Post. Fitch attributed a stable outlook to all three banks with a long-term "BBB+" rating for Bank Hapoalim and Bank Leumi. First International Bank of Israel's rating was affirmed with a "BBB." "FIBI's individual rating reflects the bank's improving profitability, but also considers poor asset quality and a worse level of unreserved, non-performing loans than in Hapoalim or Leumi," Fitch reported. The report warned that continued recovery in Israel's economy was leading to rising profitability and better asset quality, which will be positive for the ratings, but only if reserves and capital ratios are also strengthened. "Our view remains cautious as there is not enough disclosure regarding details on the growth of non-performing loans and collaterals," Oldham said. The agency could not see any tangible steps being taken by Israeli banks to improve capital ratios and unsecured, non-performing loans, he said. "These are constraints...which may, if not addressed, put downward pressure on the banks' rating." Some analysts, however, were surprised by the move given the positive momentum of the economy. On a positive note, the report attributed Bank Hapoalim's and Bank Leumi's ratings to their strong retail deposit activities, which have proven stable even during difficult times. "We will also be closely following the banks' divestment of mutual and provident funds and how these changes will be affecting the banks' performance," Oldham said.