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Global Outlook: Banks Can Largely Fend Off Tougher 2020

LONDON (S&P Global Ratings) Nov. 18, 2019--Credit conditions remain broadly supportive of global bank asset quality, even if economic growth slows, S&P Global Ratings said in a series of reports published today: "Global Banks 2020 Outlook: The Unrelenting Hunt For Returns," "Global Banking Country-By-Country Outlook 2020: The Calm Before The Turn?" and "Ratings Component Scores For The Top 200 Banks Globally--November 2019."

See these S&P Global Ratings reports:
Global Banks 2020 Outlook: The Unrelenting Hunt For Returns
Global Banking Country-By-Country Outlook 2020: The Calm Before The Turn?

"Most banks globally should be able to contend with challenging credit conditions in 2020 at current rating levels," said Emmanuel Volland, a Europe-based credit analyst at S&P Global Ratings. "At the same time, the economic outlook is delicately poised. Key risks for banks include the potential spillover effects on asset quality from slower economic growth and a weaker outlook for corporate earnings, as well as the low interest rates that are gradually pulling down banks' profitability," he added.

"A scenario of slower economic growth--primarily driven by the U.S.-China trade and strategic confrontation--and a weaker outlook for corporate earnings may ultimately take its toll on global bank asset quality and test ratings at current levels," said Gavin Gunning, an Asia-Pacific based credit analyst at S&P Global Ratings. "Moreover, our current expectations at this late stage of what has been an extraordinarily long credit cycle is that the negative turn we anticipate--whether in 2020 or now punted further afield following recent dovish sentiment by central banks--will be orderly. A significant and abrupt cyclical downturn affecting bank credit could cause a negative step change, in our view. While not our base case, this adverse scenario is far from implausible noting the high volume of credit working its way through and around the global banking system."

The significant majority of S&P Global Ratings' outlooks on banks are stable globally, supported by low credit losses and sound capitalization. However, extremely accommodative monetary policies are enabling economic imbalances to surface. In addition, the outlook for interest rates is gradually pulling down banks' net interest margins at a time of increasing competition from new nonbank players. "Banks need to take strategic measures to improve efficiency as the pain will likely get worse before it gets better," said Mr. Volland. "Those less able to make structural changes will suffer more."

This report does not constitute a rating action.

The reports are available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase copies of these reports by calling (1) 212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009.

Primary Credit Analysts:Emmanuel F Volland, Paris (33) 1-4420-6696;
emmanuel.volland@spglobal.com
Gavin J Gunning, Melbourne (61) 3-9631-2092;
gavin.gunning@spglobal.com
Secondary Contacts:Brendan Browne, CFA, New York (1) 212-438-7399;
brendan.browne@spglobal.com
Cynthia Cohen Freue, Buenos Aires +54 (11) 4891-2161;
cynthia.cohenfreue@spglobal.com
Osman Sattar, FCA, London (44) 20-7176-7198;
osman.sattar@spglobal.com
Elena Iparraguirre, Madrid (34) 91-389-6963;
elena.iparraguirre@spglobal.com
Mohamed Damak, Dubai (971) 4-372-7153;
mohamed.damak@spglobal.com
Alexandre Birry, London (44) 20-7176-7108;
alexandre.birry@spglobal.com

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