What is the health condition of banks? How has the situation changed with the more restrictive policies of the Federal Reserve and the ECB? Could the latent recession generate a new wave of bad loans and put credit institutions in trouble again? An answer has been presented by S&P Global, which took stock of the health of the banking sector.

a “stable” state

Outlook for S&P It remains for global banks steady, By October 31, 2023, 79% The outlook on bank ratings was stable and this stability is largely due to solid capitalizationfor the improvement of profitabilityLinked to progressive increase in interest rates and solid asset quality.

Impact of macroeconomic framework

weak economic prospects For 2024 – S&P Global outlines – banks’ activity volume will test asset quality and financing terms. However, the earnings of most banks will continue to benefit from higher interest rates and hence the impact of the global economic slowdown will be limited.

I risk However, the main ones can be intense. Although S&P does not have a baseline scenario, the agency believes a significant deterioration in economic conditions is possible. Europe, United States and ChinaInflation remains high and risks emanating from the Russia–Ukraine and Israel–Hamas wars.

IL real estate market Some countries – the United States, China and some European countries – are also experiencing a significant decline, characterized by a decline in demand and prices. The associated damage, although manageable, may be felt for some years.

Non-banks are most at risk

S&P forecast continues growing differences Within the credit area. In particular, he believes that the pressure of favorable economic conditions will be more pronounced non-banking financial institutions (NBFIs) and for banks in the strict sense and for institutions with weak funding profiles or direct exposures geopolitical risk,

What’s the outlook for Europe and Italy?

For Europe, S&P hopes Financing conditions will be tight: Interest rates may have peaked, but will remain high for a long time, while other monetary policy decisions can still be made, such as a rapid exit from asset purchase programs or higher reserve requirements for banks.

Economic activities will remain weak in 2024: Real GDP will grow by only 0.9% in the Eurozone and 0.5% in the UK. The labor market will slow down but should remain quite flexible. credit growth will remain slow

For them Italian BankS&P sees one strong asset quality To address economic risks. The greater resilience of Italian banks will be tested more in 2024 than in 2023. Loan losses will increase, but perhaps less than previously expected, and differences between banks will become increasingly apparent.

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