- The eight U.S. global systematically important banks (GSIBs) reported weak second-quarter 2020 earnings--weighed down by elevated credit provisions and meaningful contraction in net interest margins (NIMs), even as noninterest revenues held up.
- We expect that credit provisions will decline somewhat in the latter half of the year, which should provide a boost to bottom-line profitability.
- Nonetheless, ultralow interest rates, shrinking balance sheets, and sluggish economic activity will continue to provide headwinds to financial performance.
- We expect asset quality will deteriorate, particularly in areas facing elevated pandemic-related stress. And we expect bank balance sheets will remain relatively strong, with continued robust liquidity and funding supported by the Federal Reserve's accommodative monetary policy and market support programs and capital supported by limits on shareholder payouts.
The eight U.S. global systematically important banks (GSIBs) reported weak second-quarter 2020 earnings. Elevated credit provisions and a meaningful contraction in net interest margins (NIMs) weighed on earnings, though noninterest revenues held up reasonably well. For example, GSIBs' median earnings declined slightly more than 50% year over year in the second quarter--with some banks experiencing much steeper declines. Still, most banks reported revenue growth and remained profitable amid the pandemic-induced economic downturn, supporting our ratings.
The eight GSIBs are Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., and Wells Fargo & Co. (We also include Northern Trust Corp., which is a peer of the trust banks--Bank of New York Mellon and State Street.)
Capital markets performance was the bright spot for GSIB earnings in the quarter as global markets rebounded on the heels of government and central bank stimulus measures. Outside capital markets, noninterest income was buttressed by higher mortgage banking revenues. Net interest income (NII) declined as low rates affected NIMs, and growth in average earning assets was driven largely by the lower-yielding assets, which rendered the growth less meaningful.
Credit provisions rose substantially--more than 8x times for the median bank compared with second-quarter 2019–-as the banks continued to build their allowance for loan losses. Under the Current Expected Credit Losses (CECL) accounting methodology, banks have to use economic forecasts to guide their estimates of lifetime losses across their credit portfolios. The primary reason for the large allowance build was the weighting that banks placed on a gloomy economic scenario amid the continued spread of the coronavirus, potentially lower U.S. government fiscal support, and the uncertain outlook and internal risk rating downgrades of companies operating in industries most directly affected by COVID-19. This occurred despite the positive credit performance of the banks in the second quarter, as measured by net charge-offs, outside of pockets of deterioration, such as energy-related loans. This signals that banks view still-benign asset quality performance trends as temporary and reflective of forbearance measures and government stimulus.
Balance sheet trends were mixed in the second quarter. Loans declined from the first quarter as growth in Paycheck Protection Program (PPP) loans was offset by paydowns in commercial loans and declines in consumer loans. (Growth in average loans during the period was more substantial.) The decrease in loans and associated risk-weighted assets, however, has helped preserve capital ratios, which generally moved higher and remained well above regulatory minimums. (All banks also exceed their indicative stress capital buffer requirements, except Goldman Sachs.) Deposit growth remained robust and supported banks' liquidity as they experienced substantial deposit inflows on the heels of the Fed's massive quantitative easing since the onset of the pandemic.
Although the Fed's accommodative monetary policies and government fiscal measures mitigated any immediate net charge-off risks, we expect loan losses will rise over time. But if allowance levels need to rise substantially from here, capital ratios for some of the banks could decline meaningfully, and rating actions could ensue (see "What Lies Ahead For U.S. Bank Provisions For Loan Losses,” Aug. 12, 2020). The resilience of the U.S. economy and effectiveness of the government support programs will also be major determinants of future rating actions (see "For Large U.S. Banks, Loan Loss Expectations Will Be Key To Ratings," May 5, 2020). Risks include an economic downturn that persists longer or a rebound more tepid than we currently assume (see "Global Banks Outlook Midyear 2020: Temporary Shock, Profound Implications," July 9, 2020).
|Base-Case Expectations For GSIBs' Operating Performance In 2020|
|Category||S&P Global Ratings' Outlook|
|Net interest income||We expect NII will decline for most banks in the second half of 2020, reflecting balance sheet contraction as loan paydowns accelerate and new originations wane. Positively, lower deposit costs will help stabilize NIMs as a result of the full realization of the Fed’s rate cuts in March.|
|Noninterest income||We expect noninterest income will likely decline somewhat from the strong levels of the first half of 2020, largely owing to a reduction in capital markets revenue. While capital markets activity will likely be weaker in the back half of the year, we expect low rates will still support residential mortgage activity. Asset and wealth management revenues will partly depend on asset valuations, which have held up so far. We expect card income and service fees to remain weaker as a result of subdued consumer spending.|
|Provision for loan losses||Assuming the economic recovery takes hold, provisions for loan losses will likely decline in the second half of the year versus elevated levels of the first half. Still, the magnitude of additional provisions will be heavily influenced by the expected trajectory of the economy.|
|Noninterest expense||We expect that noninterest expenses will come into sharp focus as management works to protect bottom-line results. Banks will continue to manage costs conservatively by redeploying personnel, consolidating branches, containing head count, and growing digitalization. The pandemic will likely accelerate banks’ digitalization efforts. We expect positive operating leverage may remain elusive for many banks.|
|Loans||We expect loan growth will decelerate as commercial loan originations will normalize from high levels since the start of the pandemic. Additionally, PPP loans will begin rolling off the balance sheet as a large portion are forgiven. Further, banks' consumer businesses (outside of residential mortgage) will generate lower business volumes even as originations might gradually recover during the remainder of the year.|
|Deposits||Deposit growth will likely persist, albeit at a slower pace, as lower rates may ease customer migration to other investment alternatives. Still, the run-off of transitory commercial deposits might partially offset growth.|
|Capital||We expect capital ratios may increase further in the last half of the year, except for those banks that may need to take additional substantial credit provisions (this is not our base case expectation for any GSIB). We expect capital will be supported by restrictions on shareholder payouts, balance sheet shrinkage, and the more relaxed timeframe for the incorporation of provisions for CECL.|
|Credit quality||We expect deterioration in asset quality, particularly in areas facing elevated pandemic-related stress, although the timing and magnitude will partly depend on the continued adequacy of U.S. and Fed support programs. Nonetheless, our base-case assumption is that GSIBs’ large reserve build in the first half of the year will allow them to absorb the losses and remain profitable. GSIB asset quality is also supported by their highly diversified and granular lending portfolios, and the overall reduction that has occurred since the Great Recession.|
|Trust banks||We expect the major U.S. trust banks’ creditworthiness to remain resilient to the challenging economy and in line with their high ratings, given the companies’ low credit-risk balance sheets, good fee-based revenue, and adequate capital ratios. Although some of the trust banks will experience elevated loan loss provisions and a rise in problem loans, the trust banks’ exposures to lending is substantially lower than commercial banks’. Earnings power should continue to be solid, although fee revenues are vulnerable to market valuation fluctuations. Sharply lower rates will cause money market fee waivers in 2020 and a possible further decline in NII in the third quarter of 2020, partly because of lower securities reinvestment yields. We expect capital ratios will rise in the third quarter, aided by the suspension of common share buybacks. However, buybacks could resume by early 2021, and we expect capital ratios to be largely flat over the next year--which is neutral to the ratings.|
Our Outlooks On The GSIBs Are Stable
We recently lowered our long-term issuer credit rating on the holding company of Wells Fargo to 'BBB+' from 'A-'. The outlook is stable. This rating action followed the company's ongoing regulatory challenges and preprovision earnings pressures in the midst of the economic downturn (see "Wells Fargo & Co. Downgraded To 'BBB+/A-2' On Weakened Preprovision Earnings Amid Elevated Risks; Outlook Stable," July 22, 2020).
Our outlooks on all of the GSIBs (both at the holding companies and operating companies) are now stable (see table 2).
The ratings on Goldman Sachs remained unchanged after the company announced the resolution of criminal and regulatory proceedings in Malaysia, an important step in the company's efforts to put the 1Malaysia Development Berhad (1MDB) scandal behind it (see "The Goldman Sachs Group Inc.'s Malaysia Settlement Is Progress Toward Resolving 1MDB Troubles," July 25, 2020).
The stable outlooks reflect our expectation that GSIBs' operating performance will remain largely resilient to the economic fallout from the COVID-19 pandemic. Although earnings and credit quality will likely deteriorate meaningfully, we expect GSIBs will remain profitable while maintaining good capital and liquidity. Nevertheless, any potential outlook or rating actions will depend on the duration of the economic downturn and the pace of recovery.
|Company||Holding company rating||ALAC uplift notches||Operating company rating|
Bank of America Corp.
Bank of New York Mellon Corp.
Goldman Sachs Group Inc.
JPMorgan Chase & Co.
Northern Trust Corp.
State Street Corp.
Wells Fargo & Co.
|Note: As of Aug, 10, 2020. ALAC--Additional loss-absorbing capacity.|
High Credit Provisions And Ultralow Interest Rates Limited Earnings
Money-center banks reported weak core earnings in the second quarter (see table 3) owing to substantially higher credit provisions and meaningful compression in NIMs. Positively, better-than-expected revenues from capital markets, particularly in fixed income, currencies, and commodities (FICC) and investment banking (broad-based), provided some offset. As a result, most banks reported revenue growth--median year-over-year revenue growth was a modest 2%. A few banks reported special items, which somewhat skewed their net earnings. Wells Fargo reported $2.4 billion in operating losses, with continued customer remediation accruals and litigation reserve build contributing to the loss. Goldman Sachs added $945 million to its legal reserve (total $2.9 billion since the fourth quarter of 2018), with the preponderance related to 1MDB.
|Income Statement Trends|
|Net interest income||(11.0)||(7.3)||(3.8)||(18.3)||55.5||(11.9)||(2.7)||(8.8)||(10.9)|
|Net interest margin (bps)||(57)||(50)||(50)||(57)||N.A.||N.A.||(24)||(45)||(39)|
|Net interest margin||1.87||2.22||1.99||2.25||N.A.||N.A.||0.88||0.93||1.22|
|BAC--Bank of America Corp. C--Citigroup Inc. JPM--JPMorgan Chase & Co. WFC--Wells Fargo & Co. MS--Morgan Stanley. GS--Goldman Sachs Group Inc. BK--Bank of New York Mellon Corp. STT--State Street Corp. NTRS--Northern Trust Corp. NA--Not available. N.M--Not Meaningful. Source: S&P Global and S&P Market Intelligence.|
The yields on earning assets declined sharply following the Fed's 150 basis points (bps) rate cut in March--reflective of GSIBs' asset-sensitive balance sheets. Deposit costs declined too, albeit at a slower pace given its lagged effect (see table 4). Average earning assets increased from the prior quarter primarily because of solid growth in lower-yielding assets, such as cash equivalents, investment securities, and PPP loans.
Money-center banks, being the largest providers of PPP credit, held a significant portion of outstanding PPP loans. The lower yield on these assets rendered their strong growth less meaningful to interest income. Consequently, NII declined from the prior quarter and year over year. Further, ultralow interest rates and flattening yield curves squeezed NIMs--as the median NIM declined by a sharp 36 bps quarter over quarter.
Expenses were generally well controlled. Still, for some banks, expense growth more than offset the modest revenue growth. Nevertheless, we believe most GSIBs have sufficient preprovision net revenue (PPNR), if not better, compared with the Fed's severely adverse stress PPNR, reflecting their good earnings capacity.
|Net Interest Income Drivers|
|--Cost of deposits--||--Cost of interest-bearing liabilities--||--Yield on earning assets--||--Net interest margin--|
|Bank of America Corp.||(0.34)||(0.68)||(0.60)||(1.20)||(0.92)||(1.48)||(0.46)||(0.57)|
|JPMorgan Chase & Co.||(0.42)||(0.78)||(0.56)||(1.15)||(0.83)||(1.42)||(0.38)||(0.50)|
|Wells Fargo & Co.||(0.47)||(0.72)||(0.42)||(0.91)||(0.67)||(1.26)||(0.33)||(0.57)|
|Q/Q--Quarter over quarter. Y/Y--Year over year. Source: Company reports.|
Capital markets revenue increased substantially for all banks, reaching its highest level in several years. Capital markets benefited from heightened client activity spurred by companies seeking to raise capital in both the equity and debt markets to fortify their balance sheets for economic duress of an unknown duration. In addition, widened bid-ask spreads (due to sharp changes in market prices) and massive central bank support also contributed to the strong capital markets results.
Within capital markets, trading revenues rose sharply, by more than 65% (see chart 1) compared with the second quarter of 2019. While strong performance in rates, credit products, and commodities boosted FICC revenues, equity trading revenues benefited from improved cash and derivatives performance. Although, Citigroup and Bank of America reported lower equity trading revenues relative to the prior quarter because of weaker derivatives performance.
Investment banking revenues were up nearly 50% year over year. Equity underwriting benefitted from an increase in industrywide deal volumes, particularly follow-on offerings and convertible issuances. The drawdowns of corporate revolvers slowed significantly and were replaced by large debt issuance, which aided debt underwriting. Issuance of both investment-grade and speculative-grade debt surged during the quarter. The modest increase in advisory revenues reflected a slowdown in mergers and acquisitions as companies focused on internal operations amid the pandemic. Overall, the pace of economic recovery, continuation of Fed support, and level of business confidence will influence capital markets activity for the remainder of the year (see "Capital Markets Revenue Should Be A Bright Spot For Banks In A Tough 2020," June 23, 2020).
Beyond capital markets, mortgage banking activity was strong, as refinancing volumes and mortgage originations accelerated, a trend we expect to continue as borrowers take advantage of lower interest rates. However, as a partial offset, GSIBs reported subdued income from cards and service charges because of lower card spending and client activity. Assets under management (AUM)/wealth management fees were pressured given their lagged pricing in relation to the underlying securities, though asset valuations improved in the latter part of the quarter.
Trust Banks' Performance Highlights Resilient Fee-Based Business Models
U.S. trust banks' (Bank of New York Mellon, State Street, and Northern Trust) profitability held up well in the second quarter as the banks' predominant source of revenue--asset servicing fees--generally benefited from a higher level of transactions and a rebound in market values that aided average assets under custody and administration and AUM. Otherwise, NII declined because of the sharp drop in rates. We expect NII to continue to decline in the third quarter, partly from lower reinvestment yields in the trust banks' large securities portfolios.
Trust banks' balance sheets continued to be bloated by excess deposits, possibly reflecting the surge in liquidity in the monetary system and institutional clients placing their excess liquidity with banks. We expect the trust banks will continue to hold substantial assets in cash equivalents that should provide ample liquidity to address an eventual outflow of excess deposits.
We continue to believe that trust banks' overall credit quality will withstand this economic downturn because the companies have much less loan credit risk than commercial banks. However, elevated loan loss provisions could somewhat crimp profitability. For example, Bank of New York Mellon and Northern Trust increased their loan loss provisions in the first half of 2020 to build reserves, but further elevated provisions should not overwhelm otherwise solid fee-based profitability, in our view. If market distress or a liquidity squeeze were to reemerge (which we do not expect because of the market support from the Fed), that could hurt trust banks' risk positions because of their large (albeit secured) counterparty exposures.
Risk-adjusted capital ratios rose for all three banks in the second quarter, as a result of earnings retention and the suspension of common share repurchases. Otherwise, the Tier 1 leverage ratios are pressured by the larger balance sheets from the deposits and corresponding cash surge. We believe regulators might allow the trust banks to resume common share repurchases earlier than most commercial banks because of their good actual and stress test performances. We expect that the increase in risk-based capital ratios for the trust banks will be temporary and they will retreat to solid, but not high, levels in 2021.
Balance Sheets Will Shrink Modestly In The Second Half Of 2020
The GSIBs' balance sheets have grown notably since the pandemic began. In the second quarter, average assets increased substantially while period-end assets actually declined. (Median loans at money-center banks declined by 5% from the previous quarter.) Although commercial loan drawdowns surged and PPP loans grew strongly in the first part of the quarter, the majority of commercial loans were paid down, and PPP loan growth moderated by quarter-end. Outside of loans, securities and cash balances also rose (see tables 5 and 6).
|Balance Sheet Trends|
|Bank of America Corp.||4.6||14.4||(4.9)||3.8||8.5||25.0||0.3||(1.8)|
|JPMorgan Chase & Co.||2.3||17.8||(3.6)||2.3||5.2||26.7||1.4||(0.8)|
|Wells Fargo & Co.||(0.6)||2.4||(6.3)||(0.5)||2.5||9.5||(2.0)||(10.1)|
|Goldman Sachs Group Inc.||4.8||20.8||(8.8)||39.8||22.1||61.4||(2.9)||(1.1)|
|Bank of New York Mellon Corp.||(5.5)||16.0||(11.2)||5.7||(9.3)||20.8||4.2||3.1|
|State Street Corp.||(22.7)||16.0||(17.0)||5.7||(22.0)||17.5||4.7||2.9|
|Northern Trust Corp.||(6.4)||19.7||(10.8)||9.0||(7.2)||21.8||5.0||5.8|
|*Loans include loans held-for-sale. Q/Q--Quarter over quarter. Y/Y--Year over year. Sources: S&P Global Ratings and S&P Market Intelligence.|
|--Total Loans--||--Consumer Mortgages--||--Credit Cards--||--Other Consumer--||--Total Consumer--||--Commercial--|
|Bank of America Corp.||(4.9)||3.6||(1.8)||5.2||(8.3)||(10.4)||(1.7)||(2.5)||(3.1)||0.4||(6.4)||6.5|
|JPMorgan Chase & Co.||(3.6)||2.3||(4.0)||(14.1)||(8.0)||(10.1)||19.1||19.7||0.0||0.0||(5.9)||10.4|
|Wells Fargo & Co.||(7.4)||(1.5)||(5.2)||(4.3)||(6.6)||(7.2)||(1.1)||1.1||(4.6)||(3.6)||(9.6)||0.2|
|Q/Q--Quarter over quarter. Y/Y--Year over year. Source: Company reports.|
Consumer loans also declined across the board, particularly credit cards. The federal government's income replacement initiatives left consumers flush with cash, and widespread stoppages in economic activity restricted opportunities for spending, particularly for travel and entertainment. Mortgage origination volumes picked up, but banks remained hesitant to hold long-duration assets on their balance sheets given the likely trajectory of interest rates.
At the median, banks reported strong broad-based growth in deposits, both from the previous quarter and year over year. Commercial deposit growth reflected the accumulation of liquidity gained through commercial drawdowns and PPP loans. Subdued consumer spending and government stimulus payments drove retail deposit growth. The migration of commercial deposits into interest-bearing accounts from non-interest-bearing accounts has decelerated, resulting in overall lower deposit costs (see chart 2). We expect the pandemic to accelerate digital adoption by consumers, particularly for deposit gathering. (Banks reported quarter-over-quarter increases in both online and mobile banking users in the second quarter.)
Liquidity at the GSIBs remains robust, helped by the Fed's accommodative monetary policy and management teams' conservative risk postures--in part because of more sophisticated contingency funding planning/liquidity risk management and the need to meet regulatory benchmarks such as the liquidity coverage ratio. GSIBs have been the primary beneficiaries of the large inflow of deposits and cash balances since the start of the pandemic. Growth in investment securities has further buttressed liquidity. The continuation of the Fed's accommodative policies and banks' limited cash deployment opportunities will likely ensure liquidity remains strong through the remainder of 2020.
We believe GSIBs entered this stress period from a position of strength with adequate capital buffers. GSIB capital ratios rose from the previous quarter, partly from the suspension of common share repurchases (see table 7), as well as from lower-risk weighted assets as less risky assets (cash, PPP loans, and investment securities) drove asset growth.
In its June 2020 stress test, the Fed projected that GSIBs have sufficient capital to withstand a traditional severely adverse scenario, but in new COVID-19 stress scenarios, some banks might approach minimum requirements (see "The Fed's Latest Stress Test Points To Limited Bank Capital Returns," July 1, 2020). The Fed's restrictions on shareholder distributions should help preserve capital. GSIBs will need to update and resubmit their capital plans later this year.
In addition, the stress capital buffer (SCB) will be implemented in fourth-quarter 2020. Per the most recent Fed stress test, three GSIBs--Goldman Sachs, JPMorgan, and Morgan Stanley--have SCBs higher than the 2.5% capital conservation buffer.
|Common Equity Tier 1 Ratio--Basel III Fully Phased-In--|
|(%)||Q2 2020 standardized||Q2 2020 advanced||Q1 2020 standardized||Q1 2020 advanced||Quarter-over-quarter change (bps)--standardized||Quarter-over-quarter change (bps)--advanced||Advanced/standardized (lower of the two) Q2 2020||Stressed capital buffer*||Proposed standardized CET1 minimum||Current CET1 surplus (deficit) over (under) proposed minimum|
|Bank of America Corp.||11.6||11.4||10.8||11.1||80||30||A||2.5||9.5||2.1|
|JPMorgan Chase & Co.||12.4||13.2||11.5||12.3||90||90||S||3.3||11.3||1.1|
|Wells Fargo & Co.||11.0||11.1||10.7||11.4||30||(30)||S||2.5||9.0||2.0|
|Goldman Sachs Group Inc.||13.3||11.9||12.5||12.3||80||(40)||A||6.7||13.7||(0.4)|
|Bank of New York Mellon Corp.||12.7||12.6||11.3||11.4||140||120||A||2.5||8.5||4.2|
|State Street Corp.||12.3||12.7||10.7||11.1||160||160||S||2.5||8.0||4.3|
|Northern Trust Corp.||13.4||13.9||11.7||12.9||170||100||S||2.5||7.0||6.4|
|*Stressed capital buffers (SCB) from 2020 DFAST results. SCB effective Oct. 1, 2020. Sources: Company reports, S&P Global Ratings, the Federal Reserve Board, and regulatory filings.|
Asset Quality--The Calm Before The Storm
The COVID-19 pandemic and government response to it will have a meaningful impact on banks' asset quality. We view that 2019 marked the end of a multiyear period of benign credit quality for banks.
Median nonperforming asset and net charge-off ratios deteriorated modestly from the benign levels of 2019, though still remain relatively good (see table 8). At the same time, banks reported large credit provisions in anticipation of worsening asset quality. Incorporating CECL, all of the banks built significant allowances in the first half of the year. However, some banks' management teams indicated reserves may remain stable, though it will depend on the economic outlook.
|--Nonperforming assets*--||--Net charge-offs§--||--Reserves to loans--||--Reserve release (build)/pretax income--|
|Q2 '20 (%)||Q/Q (bps)||Y/Y (bps)||Q2 '20 (%)||Q/Q (bps)||Y/Y (bps)||Q2 '20 (%)||Q/Q (bps)||Y/Y (bps)||Q2 '20 (%)||Q/Q change||Y/Y change|
|Bank of America Corp.||0.46||5||(0)||0.44||1||7||1.93||44||94||(105)||(24)||(105)|
|JPMorgan Chase & Co.||0.86||23||31||0.63||2||4||3.28||99||190||(160)||59||(163)|
|Wells Fargo & Co.||0.81||19||16||0.45||8||18||1.95||86||96||N.M||N.M||N.M|
|*NPAs are reported nonperforming loans divided by total loans. §NCOs are total net charge-offs (annualized) divided by average loans. †Citi's Q2 '20 average loans is the average of period-end gross loans from Q2 '20 and Q1 '20. N.M--The calculation rendered meaningless as Wells Fargo reported net loss in Q2 '20. Sources: Company reports and S&P Market Intelligence.|
In response to prospective asset quality deterioration, banks have been tightening lending standards. According to the July 2020 Federal Reserve Senior Loan Officer Survey, banks tightened their lending standards across all loan categories for the second quarter 2020, particularly within commercial and industrial loan books, which saw the most tightening since 2008. We believe banks are cautious in commercial lending, particularly given the risks associated with exposure to industries vulnerable to the pandemic, energy, and commercial real estate.
The risk arising from leveraged lending at GSIBs remains manageable in our view, though not insignificant. Leveraged loans are a small portion of GSIB-funded loans, but the banks bear the risks associated with syndicating these loans. Some banks also have portfolios of collateralized loan obligations, although these tend to be small and consist of highly rated tranches.
We believe forbearance efforts banks implemented have largely been successful at forestalling asset quality issues. This is evidenced by a decline in the percentage of borrowers remaining in forbearance from the inception of the programs through the banks' second-quarter earnings release dates. So far, delinquencies for GSIBs have remained benign. Nevertheless, the forbearance and government stimulus programs will likely serve as a temporary alleviator but not a permanent fix.
Overall, we believe the efficacy of forbearance efforts and government programs designed to supplement consumer income and prop up commercial enterprises are key in determining the ultimate severity of credit losses. The cessation or maintenance of these initiatives, trajectory of unemployment, and the strength of the economic recovery are also important. Lastly, we expect loss recognition may be extended beyond the traditional time frames given the deferment options available to consumers. We also believe that the Fed's programs designed to stabilize financial markets may help reduce financial pressure large commercial borrowers. Nonetheless, we still expect certain speculative-grade companies to struggle, particularly those exposed to vulnerable industries.
This report does not constitute a rating action.
|Primary Credit Analyst:||Rian M Pressman, CFA, New York (1) 212-438-2574;|
|Secondary Contacts:||Devi Aurora, New York (1) 212-438-3055;|
|Stuart Plesser, New York (1) 212-438-6870;|
|Barbara Duberstein, New York (1) 212-438-5656;|
|Research Contributor:||Srivikram Hariharan, CRISIL Global Analytical Center, an S&P affiliate, Mumbai|
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