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1、This report does not constitute a rating actionGlobal Bank Outlook 2023Greater Divergence AheadNovember 17,2022Contents2Key Takeaways3BICRAs,Ratings,And Outlooks 4What Are We Watching In 2023?7Higher-For-Longer Inflation Will Weigh On Economies8Hybrids AT1:To Call Or Not To Call?9Climate Risk:Banks
2、Are Making Progress10Future Of Banking:Crypto And DeFi12Emerging Markets:Clouds Are Gathering13North America14Europe20Asia-Pacific29Latin America36Related Research41Analytical Contacts423Key Takeaways The darkened economic outlook presents headwinds for banks asset quality,business volumes,and finan
3、cing conditions.Positively,earnings greatly benefit from the monetary policy tightening.Rating trends across the global banking sector will be tested in 2023.Our banks net outlook ratio is likely to deteriorate from a 6%positive.The likelihood of economic recession in Europe and the U.S.has increase
4、d;inflation is at multi-decade highs in many countries;and the spillover from the Russia-Ukraine war continues.Strong bank balance sheets should buffer headwinds,with solid capitalization and sound asset quality.We anticipate increasing credit divergence.Deterioration will be more acute for emerging
5、 market banks,nonbank financial institutions,and entities in countries most exposed to energy restrictions.Private and public sector sensitivities increase.Private and public sector sensitivities increase.Property sector challenges intensify.Property sector challenges intensify.Digitalization,ESG,an
6、d cyber to challenge Digitalization,ESG,and cyber to challenge banks business models and risk management.banks business models and risk management.Our economic base case does not hold.Our economic base case does not hold.A material downside emerges-including a full-blown recession with a sharp rise
7、in unemployment.More corporate insolvencies exacerbated by high leverage;and high government debt limiting sovereigns to provide extraordinary support.Idiosyncratic stresses increase in some countries.Notably,developer stress in China,and the deterioration of highly indebted households under higher
8、interest rates.Nontraditional risks add to the usual credit,market and operational risks.Key Risks 4BICRA|Stable Trends Post-Pandemic May Be TestedBICRA-Related Changes In The Top 20 Banking Markets:2022 Indonesia:Economic risk trend to stable from negative(November).Italy:Economic risk trend to sta
9、ble from positive(August).Germany:Economic risk trend to negative from stable(July).Korea:Industry risk score to 3 from 4,and Industry risk trend to stable from positive(June).China:Economic risk trend to stable from positive(May).Spain:Economic risk trend to stable from negative(March).BICRA Scores
10、 and economic and industry risk trends Top 20 banking marketsA BICRA(Banking Industry Country Risk Assessment)is scored on a scale from 1 to 10,ranging from the lowest-risk banking systems(group 1)to the highest-risk(group 10).Data as of Nov.16,2022.Source:S&P Global Ratings.BICRA Developments In 20
11、225Philippines:ER trend to stable from negativeTurkey:ER score to 9 from 8,and ER trend to stable from negativeFebruaryJanuaryKazakhstan:ER trend to stable from positive,and IR trend to stable from positiveThailand:BICRA to Group 7 from Group 6,and IR score to 6 from 5Spain:ER trend to stable from n
12、egativeMarchJamaica:ER trend to stable from negativeCosta Rica:ER trend to stable from negativeUkraine:IR trend to stable from positiveAprilSlovenia:ER score to 4 from 5Ireland:ER score to 4 from 5,ER trend to stable from positive,and IR trend to stable from negativeArmenia:ER trend to negative from
13、 stableSri Lanka:IR score to 10 from 9,and IR trend to stable from negativeChina:ER trend to stable from positiveMayKorea:IR score to 3 from 4,and IR trend to stable from positiveEl Salvador:BICRA to Group 9 from Group 8 and IR score to 8 from 7Malaysia:ER trend to stable from negativeJuneGermany:ER
14、 trend to negative from stableJulyIceland:ER score to 5from 4,ER trend to stable from negative and IR score to 5 from 6Greece:ER score to 7from 8 and IR trend to positive from stableMalaysia:ER trend to stable from negativeAugustItaly:ER trend to stable from positiveSeptemberCyprus:ER score to 7 fro
15、m 8Georgia:BICRA to Group 7 from Group 8 and ER score to 7 from 8Portugal:BICRA to Group 5 from Group 6 and IR score to 5 from 6,and IR trend to stable from positiveOctoberArmenia:ER trend to stable from positiveThailand:ER trend to stable from negativeTurkey:ER trend to negative from stableChart in
16、cludes changes in BICRA group,industry and economic risk trends and scores.Data as of Nov.16,2022.BICRA-Banking Industry Country Risk Assessment.ER-Economic risk.IR-Industry risk.Source:S&P Global Ratings.NovemberIndonesia:ER trend to stable from negativeBank ratings are likely to be resilientEvolut
17、ion of ratings distribution for the top 200 rated banksBroadly stable outlooks may be tested in 2023Evolution of outlooks for the top 200 rated banks by region Top 200 Banks|Generally Stable Outlook Heading Into 20236Operating company issuer credit ratings.Source:S&P Global Ratings.APACAsia-Pacific.
18、LATAM-Latin America.CEE-Central and Eastern Europe.MEA-Middle East and Africa.CW-CreditWatch.Source:S&P Global Ratings.0%20%40%60%80%100%Nov.2021Jun.2022Nov.2022Nov.2021Jun.2022Nov.2022Nov.2021Jun.2022Nov.2022Nov.2021Jun.2022Nov.2022Nov.2021Jun.2022Nov.2022CEE&MEALATAMAPACNorthAmericaWesternEuropeNe
19、gativeDevelopingStablePositiveCW Pos01020304050CCC-CCCCCC+B-BB+BB-BBBB+BBB-BBBBBB+A-AA+AA-AAAA+AAAJun-22Nov-221.How much will weaker growth hurt banks?A darkened GDP growth outlook in the U.S.and EuropeWhat Are We Watching In 2023?71.For India,fiscal year beginning April 1 in the reference calendar
20、year.2.Source:S&P Global Market Intelligence,S&P Global Ratings.3.Sources:IIF;S&P Global Ratings.4.NPL-Nonperforming loans.RMB-Chinese renminbi.1H-First half.f-Forecast.Source:S&P Global Ratings3.Debt leverage is stabilizing but could hurt banksGlobal debt-to-GDP trends,2007-2022p4.How much will pro
21、perty affect bank asset quality?China property development loans and NPLs2.Borrowing costs are increasing sharply10-year government bond yields(%)-1.01.03.05.0Dec-20Mar-21Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22AustraliaGermanyItalyJapanU.K.U.S.-2.00.02.04.06.08.0U.S.EurozoneChinaJapanU.K.IndiaBrazil%20
22、222023202420255860857589658050100150GovernmentHouseholdsFinancial CorporatesNonfinancialcorporatesDebt-to-GDP(%)June 2007June 2019June 2020June 20220.02.04.06.011.512.012.513.020201H 202120212022f2023f2024f%Tril.RMBProperty development loans(left scale)NPL(right scale)Interest
23、Rates|Higher Inflation Will Weigh On Economies And Banks f-S&P Global Ratings forecast.ECB-European Central Bank.BoE-Bank of England.SNB-Swiss National Bank.Source:S&P Global Ratings.The macro picture has shifted dramatically in 2022.Four-decade high inflation is the number one issue in many countri
24、es.The main challenge for central banks is to rein in and re-anchor expectations without causing a recession.Central banks reversed their relaxed policy stance in response to continuing cost pressures in global supply chains.This has been amplified after Russias military actions destabilized energy,
25、food,and other commodity markets.As economic growth slows and financing conditions become tighter,we see a risk that sharply higher interest rates,persistent inflation,and consumer caution will push the U.S.and Europe into recession in 2023.Policy interest rates and S&P Global Ratings forecasts(%)U.
26、S.(Fed)Eurozone(ECB)U.K.(BoE)Switzerland(SNB)Policy Rates Fed Funds rateDeposit rateRefi rate20210.1(0.5)0.0 0.25(0.75)2022f2.21.52.02.751.252023f4.O2.02.5 2.751.52024f3.11.52.0 2.51.52025f2.81.52.0 2.51.58 A few banks recently decided not to call their perpetual Additional Tier 1(AT1)instruments on
27、 the optional call date.Bank decisions about whether to call an AT1 at an optional call date depend on refinancing conditions.Banks typically call AT1 instruments on their first optional call date and replace them with newly issued instruments when the cost of a replacement instrument is in line wit
28、h or cheaper than the original hybrid.Prior to the Global Financial Crisis,bank investors expected calls to always be exercised.Following market responses to the first non-call decisions in 2008,global regulators reformed Tier 1 hybrids to exclude hybrids with step-ups or similar incentives to redee
29、m,thereby aiming to focus call decisions on relative financing costs.Since AT1 hybrids have no step-ups,several banks have since chosen not to exercise call options depending on refinancing and regulatory capital management considerations.Non-calls dont cut off market access.Weve seen banks be able
30、to issue new hybrids at comparable costs to other issuers following a decision to not call a hybrid.Examples include Standard Chartered in 2016,Santander from 2019 and Deutsche Bank in 2020,with each able to access hybrid capital markets afterwards.We expect more frequent non-call decisions as banks
31、 may choose to use the flexibility built into these instruments.In the current high and volatile interest rate environment,non-calls will often be the more economically rational behavior rather than an indication of capital or credit strains.We believe investors increasingly recognize the optional n
32、ature of call dates,as reflected in secondary market pricing of bank hybrids.The optional nature of a call on hybrid capital instruments is a key feature of such instruments.It provides an issuer with the flexibility to manage its capital and the timing of any refinancing.Under our criteria,a banks
33、decision not to call the hybrid capital instrument does not constitute a default.9Volatile refinancing conditions highlight the flexibility to not call hybrids at optional call datesRising Interest Rates Could Prompt More Banks To Not Call Hybrids10Banks And Climate Risk|Material Progress In Recent
34、Years Fighting climate change is a top priority for an increasing number of governments,policymakers,and regulators.Regulatory climate stress tests are developing rapidly.Banks awareness and preparedness is improving.Climate-related skills of board members and top management are improving.More clima
35、te-related data become available,and methodologies are progressing.The energy transition offers business opportunities for banks.The suite of“green”products is broadening.RegulationIntroduction of newor tighter policies and regulationsPublic awarenessIncreased awarenessof environmental and societal
36、changesLiabilitiesLegal actions can result in a rapid materialization of a financial impactAccountingAdoption of standardized accounting methods to quantify and disclose the impact of ESGBanks And Climate Risk|Sizeable Challenges And Uncertainties Remain11 Climate risks are hard to quantify as they
37、are new,complex,and long term.Data availability and comparability remain an issue.Current focus is on credit risk,but other risks are growing(e.g.,legal,reputation,greenwashing).Several recommendations and disclosure standards.Banks face pressure in opposite directions from different groups.Strategi
38、c decisions on exclusion versus customer engagement are difficult.Pricing of climate risk is complicated.Nature-related risks will increase over time.Banks Exposure To Crypto Will Entail Novel Risks12 The crypto ecosystem is evolving rapidly and throwing up novel risks for the entities operating wit
39、hin or exposed to it;the failure of crypto exchange FTX is the latest example.Banks exposure to date has been limited but established financial institutions are increasingly engaging with the emerging ecosystem.Credit risks include new variations on traditional risks,such as new drivers of competiti
40、ve dynamics or collateral quality,and new types of third-party dependency.They also include entirely new risks,such as those relating to the convertibility of cryptocurrency into fiat currency;the interaction between a DeFi protocols on-chain and offchain activities;or the uncertain and rapidly deve
41、loping regulatory environment.Exploring Crypto And DeFi Risks In Credit Ratings,published June 30,2022 Emerging Markets|Clouds Are Gathering13 Tightening financing conditions,a strong U.S.dollar,slower growth in China,and a potential recession in the U.S.and Europe signal tougher times ahead for eme
42、rging markets(EMs).Monetary policy will likely continue to tighten in developed markets.Coupled with high energy and food prices,we expect the effects on EM households,corporations,and banks to start surfacing.Financing will be harder to come by and the strengthening of the U.S.dollar is not helping
43、.This could fuel social tensions,particularly in EMs with limited fiscal space.International support is key to alleviate the pressure.Political/geopolitical risks are on the rise.The potential for a near-term resolution of the Russia-Ukraine war is waning.High energy and food prices,lower economic g
44、rowth and limited job creation coupled with election cycles could trigger instability.Our negative outlook bias for rated issuers across EMs could widen over the coming quarters as high interest rates,persistent inflation and weakening demand could erode corporate profits,households purchasing power
45、,and banks asset quality.Few issuers will benefit from this situation,mainly in commodity exporting countries.Risks are rising as global economy slows down and liquidity becomes scarcer and more expensive14North America We expect the U.S.economy to fall into a shallow recession in the first half of
46、2023 and to grow 0.2%for the full year with a chance of a harder landing.We expect Canadas growth to slow to 1.1%.We forecast U.S.unemployment to reach 4.8%by the end of 2023 and peak at 5.7%by early 2025.The Fed will likely raise rates to 400-425 basis points by early 2023.It will keep monetary pol
47、icy tight until inflation begins to moderate in second-half 2023.Risk is for more rate hikes.15U.S.Real GDPChained 2012 prices(bil.$)Credit Conditions:North Americaf-Forecast.Sources:U.S.Bureau of Economic Analysis,S&P Global Market Intelligence,and S&P Global Ratings Economics forecasts.4,2004,4004
48、,6004,8005,0005,2005,4005,6001Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 2022f3Q 2022f4Q 2022f1Q 2023f2Q 2023f3Q 2023f4Q 2023f1Q 2024f2Q 2024f3Q 2024f4Q 2024f1Q 2025f2Q 2025f3Q 2025f4Q 2025fQuarterly2022 Sep.baseline2022 J
49、un.baseline2022 Mar.baseline2021 Nov.baseline2021 Sep.baseline2018-2019 trend Credit Conditions|North America16Key ExpectationsU.S.banks should earn a return on equity in the high-single or low-double digits,helped by higher interest rates.After rising an expected 15%-20%in 2022,net interest income
50、should increase moderately further in 2023,helping banks offset pressure on fee income and expenses.Asset quality,which has been benign,will inevitably worsen with recession,but banks are well positioned to absorb higher provisions.We see parts of commercial real estate,commercial lending,and credit
51、 card lending as areas of potential weakening.Capital will remain in good shape while quantitative tightening by the Fed will cause liquidity,which has been historically strong,to weaken toward pre-pandemic levels.Key AssumptionsThe economy will enter a shallow recession in the U.S.and slow further
52、in Canada.For full-year 2023,real GDP will rise 0.2%in the U.S.and 1.1%in Canada.The Fed will push its target range for the Fed funds rate to 4.00%-4.25%by early 2023 and gradually shrink its balance sheet.Inflation will start to decline in North America,falling to 3.7%for full-year 2023 in the U.S.
53、Core prices will fall to the Feds target in first-quarter 2024.Key RisksThe Fed is unable to engineer a soft landing;the economy enters a deeper recession;and asset quality deteriorates significantly.Inflation is even more persistent than expected despite a slowdown in growth,forcing the Fed to tigh
54、ten more aggressively.A further drop in asset prices weighs on confidence as well as fee income sources like asset and wealth management,investment banking,and mortgage banking.U.S.Forecast|NII Helps Offset Rising Provisions And Other Pressures17Funding and liquidityRevenuesExpensesProfitabilityCred
55、it qualityCapitalNet interest income should rise further on higher rates,following a 15%-20%rise in 2022.But fee income may remain weak owing to muted activity in mortgage banking and investment banking and reduced asset valuations.Banks will keep focusing on expenses,consolidating branches,and digi
56、tizing.However,wage inflation and investments in technology will drive expenses up somewhat.Banks may continue to pursue mergers to drive efficiencies,but regulators may be more conservative in approving deals.Profitability will remain reasonably good as improved net interest income helps offset hig
57、her provisions and expenses and tepid fee income.We expect an industry return on common equity of 9%-12%.However,a deeper recession would lead to higher provisions and weaker results.While most measures of credit quality remain in very good shape,we expect delinquencies and charge-offs to rise towar
58、d historical averages with a shallow recession.A recession of greater magnitude would cause a larger and more rapid increase in both charge-offs and reserves.The June 2022 Fed stress test resulted in increased capital requirements for several large banks-leaving them less room to reduce capital-and
59、caused three GSIBs to increase their capital ratios.The weakening economic outlook has also led some banks to express caution.While some banks may still gradually reduce their capital ratios,we dont expect capital in the industry to move meaningfully lower overall.Funding will remain broadly stable,
60、and market access for D-SIBs issuances internationally will remain strong.High levels of customer deposits amassed during the pandemic continue to drop as consumer and business spending has been high.Soaring inflation is eating into savings and,thus,customer deposit growth may moderate further.Neutr
61、alImprovingWorseningCanada Forecast|Results To Remain Fairly Strong Despite Headwinds18Funding and liquidityRevenuesExpensesPretax incomeAsset qualityCapitalD-SIBs revenue growth is benefiting from healthy loan volumes,although residential mortgage loan growth is slowing because of rising interest r
62、ates while the business loan pipeline remains strong.Revenue contributions from capital markets and wealth management businesses could remain challenged in 2023 should financial markets stay volatile.Banks personal and commercial lending businesses will likely drive revenue growth in 2023.Expenses r
63、emain elevated owing to high inflation.Certain D-SIBs are putting major IT and other projects on hold while dealing with elevated expenses and moderating revenue growth.Achieving positive operating leverage in 2023 might be a stretch.We expect 2023 pretax income will be relatively unchanged from 202
64、2 or slightly higher,benefiting from expanding margins in a rising rate environment,which we expect will be somewhat offset by increasing provisions for loan losses and high expenses.Although we expect provisions will normalize through 2023,we see them remaining well below the peak during the pandem
65、ic.There are no signs of asset quality weakness yet;however,aggressive rate hikes will hinder some borrowers capacity to pay,which could result in higher net charge-offs(NCOs).However,we expect NCOs to be manageable.We believe that the banks are properly reserved for modestly higher NCOs.Should the
66、economic outlook deteriorate significantly,we suspect that some D-SIBs might need to add to their reserves.S&P Global Ratings risk-adjusted capital(RAC)ratios of D-SIBs are expected to remain within our adequate range of 7%-10%in 2023;however,TD Banks and BMOs recent acquisitions,expected to close i
67、n first-quarter 2023,will bring their RAC ratios down to just above 7%,reducing flexibility to deal with large loan losses.We would expect these banks to rebuild capital with still strong internal capital generation.Dependence on wholesale funding has been rising to fund strong loan growth while cus
68、tomer deposit growth has been declining because household savings are eroding due to high inflation.We expect this trend will continue into 2023.Dependence on wholesale funds may ease somewhat as loan growth moderates.Appetite for D-SIBs issuances internationally remains strong.NeutralImprovingWorse
69、ning19Key Risks For U.S.Banking SectorDepth and duration of downturnMarket stress potential impact on liquidity conditions Asset price corrections cause credit problems Secular changes affecting commercial real estateFully transitioning from LIBOR by June 2023Challenges from fintech,cybersecurity,an
70、d digital transformationPersistently highinflation and marketdisruptionGeopolitical risks20Europe Credit Conditions|Europe The European economy will stagnate in 2023.We forecast real GDP growth in the eurozone at just 0.3%,with some large European economies(Germany,Italy and the U.K.)falling into a
71、shallow recession.However,unemployment will be only mildly affected.Financing conditions will tighten further,amid additional rate hikes and a worsening credit outlook.Risks are on the downside.There is a material likelihood of geopolitical risks turning the economic outlook more difficult,with Euro
72、pe falling into a longer and deeper recession,while financing conditions could also become overly restrictive if inflation does not come under control.(2)0246202220232024%Eurozone GDP growth forecast base case Sep.2022Eurozone GDP growth forecast downside scenario Sep.2022Eurozone GDP growth forecas
73、t base case Dec.202220232024%Eurozone inflation forecast base case Sep.2022Eurozone inflation forecast downside scenario Sep.22Eurozone inflation forecast base case Dec.2021A sharp slowdown is imminentInflation above target until 2024Corporate yields to rise furtherDataas of Oct.20,2022.S
74、ource:FREDandS&P GlobalRatings CapitalIQ.Source:S&P GlobalRatings.Source:S&P GlobalRatings.024680022%S&P Eurozone Investment Grade Corporate Bond IndexICE BofA Euro High Yield Index Effective Yield European Banks22Key ExpectationsOur ratings bias remains stable,but we cannot di
75、sregard more negative outlooks emerging,given sizable downside risks to our macro projections.Materially higher interest rates will be a tailwind for European banks earnings,but modest(if at all)economic growth and high inflation will also lead to weaker business prospects for banks and higher credi
76、t and operating costs,which will eat up some of the additional earnings.Credit quality will deteriorate,particularly in small and midsize enterprise(SME)and consumer lending portfolios.The impact will generally be manageable,but uneven by region and economic sector.European banks capital and funding
77、 profiles will remain resilient.Tighter financing conditions will represent more of a risk for weaker nonbank players.Given extreme volatility,banks could also face unexpected event risks.Key AssumptionsThe military conflict in Ukraine will not spread to other countries,nor will unconventional weapo
78、ns be used.Supply chain bottlenecks will gradually ease,but full exports of Russian gas to the EU will not resume anytime soon.The European Central Bank(ECB)will continue raising rates until the refinancing rate reaches 2.5%,expected by the end of first-quarter 2023.Balance sheet reduction will star
79、t only at the end of 2024.Key RisksA fully fledged recession in Europe,with a more significant impact on asset quality and banks business and profitability prospects.Inflation remaining persistently high,leading to further restrictive financing conditions.Heightened market turbulence that increases
80、market risk events.Banks failure to deliver commercially and operationally resilient business models.Widespread,high impact cyberattack events.Solid profitability ahead as higher net interest income helps to absorb higher operating and credit costsEvolution of profit before tax for significant euroz
81、one banks under our base caseBut in a recession,banks profits will halveReturn on equity of significant eurozone banks0204060800180Profit before tax(2021)Net interest incomeOther noninterest incomeAdministrativeexpensesand depreciationImpairment and provisionsOtherProfit before tax(2022)N
82、et interest incomeOther noninterest incomeAdministrativeexpensesand depreciationImpairment and provisionsProfit before tax(2023)Bil.2305200022e2023e%Base case rangeDownside case rangeHigher Interest Rates Will Support European Banks Earningse-Estimate.Source:ECB,S&P
83、Global Ratings.e-Estimate.Source:ECB,S&P Global Ratings.SME and consumer lending portfolios are more prone to show deterioration,mortgages will prove resilientBreakdown of European banks loans to the nonfinancial sectorMost banks have capital headroomTop 100 European banks 2022f S&P RAC ratio(%)24As
84、set Quality Problems Will Emerge But Deterioration Should Be ContainedSource:EBA Risk Dashboard.Data as of June 2022.*For France the share of HH mortgages is underestimated due to the absence of guaranteed residential real estate loans,which are included under Other loans to HH Note:Yellow lines rep
85、resent thresholds for RAC ratio and related capital&earnings score.Source:S&P Global RatingsImpact will be uneven by country and sector0%20%40%60%80%100%HH mortgagesOther loans to HHLarge corporatesSMEsCRE051015202530Repayment of 1.5 trillion TLTRO maturities in 2023 should be manageable given exces
86、s cashBut new debt to be issued will come at a much higher costITraxx indices for European financials25The Era Of Cheap Funding Is OverSource:ECB.Dotted lines indicate upcoming repayments of ECB refinancing operations.Source:Bloomberg.Low-cost funding will again become a competitive advantage0501001
87、50200250300350400Jan-20May-20Sep-20Jan-21Jun-21Oct-21Feb-22Jul-22Basis pointsSubordinatedSenior01,0002,0003,0004,0005,0002000222024Bil.TLTRO BorrowingsLiquidity deposited at ECB Emerging Markets|EMEA Banks26Key ExpectationsCost of risk will continue to recede in commodity expor
88、ting countries while increasing in other emerging markets.Of a specific note,Turkish banks face increasing risk from imbalances in the economy,which are widening rapidly amid a surge in real estate prices and highly accommodative monetary policy in a hyperinflationary environment.The longer this las
89、ts,the bigger the likely impact on the banking system will be.Profitability is improving in commodity exporting countries in EMEA-EM thanks to lower cost of risk and higher interest rates.Elsewhere,we expect profitability to remain under pressure.Key AssumptionsTightening financing conditions,slower
90、 growth in China,weaker economic prospects in Europe,and a potentially deeper recession in the U.S.than projected signal tough times ahead for EMEA-EM.With core inflation picking up,monetary policy will likely continue to tighten.Coupled with persistently high energy and food prices,we expect the ef
91、fects on EM households,corporations,and banks to start surfacing.Key RisksContinued conflict between Russia and Ukraine,stronger-than-expected disruption of gas supply to Europe,more aggressive tightening by the Fed,continued strengthening of the U.S.dollar,and lower growth in China pose downside th
92、reats to our base case scenario.Turkish Banks Remain Vulnerable To Rollover Risk27Sources:Turkish Banking Regulation and Supervision Agency,S&P Global Ratings.We still expect Turkish banks to be able to access external funding and external debt to continue reducing gradually over the next few years
93、if the government can contain balance-of-payment risks.Banks remain highly vulnerable to negative market sentiment and risk aversion,due to their high external debt.We consider that lower and more expensive global liquidity,in addition to high inflation and unpredictable monetary policy,heightens re
94、financing risks.Although Turkish banks have sufficient foreign currency liquidity to handle lower roll-over rates,most of it is either with the central bank or placed in government securities,which could reduce its availability in a highly stressed scenario.In addition,we see a risk that depositors
95、might lose confidence in the banking system.0%10%20%30%40%50%60%70%030609002001920202021Jun.2022Bil.U.S.$Total external debtDeposit dollarization28Improving Financial Performance For Some EM-EMEA BanksSaudi Arabia:Strong growth thanks to mortgages and increasingly corporate loa
96、ns.Banks will benefit from higher rates and their cost of risk will return to normalized levels.South Africa:Credit conditions are tightening due to higher rates.Retail lending will be muted while corporate lending recovers.Lower impairment charges and higher net interest margins will support profit
97、ability.Turkiye:We expect banks nonperforming loans(NPLs)to remain contained in 2023.That said,we acknowledge that NPL ratios in Turkiye are also influenced by significant restructuring,as well as credit expansion at deeply negative real interest rates that facilitates the rollover of credit lines a
98、nd inflates denominators.Strong real estate performance and economic growth have also helped NPLs collection.Commodities exporters will benefit from a more supportive environmente-Estimate.f-Forecast.NPA-Nonperforming assets.ROA-Return on assets.Source:S&P Global Ratings.Growth and higher rates will
99、 help0.01.02.03.04.05.06.0002021e2022f2023f2021e2022f2023f2021e2022f2023fSaudi ArabiaSouth AfricaTurkey%Credit growth(left scale)NPA ratio(right scale)ROA(right scale)29Asia-PacificLower growth.Asia-Pacifics economic growth is being hit by potential recessions in the U.S.and Europe,and Ch
100、inas lower growth rates.As the region is a net exporter,a global slowdown will hinder the recovery of corporate and government revenues,which in many cases arent yet back to 2019 levels.Higher cost of goods.Although consumer price index(CPI)inflation in parts of Asia-Pacific is tamer versus Europe o
101、r the U.S.,the higher prices of energy,commodities and other goods are hurting borrowers.Energy subsidies are squeezing government finances.Many corporates have yet to fully pass through the additional cost of goods,implying CPI inflation could persist.Tighter financing.Excepting China and Japan,off
102、icial interest rates in the region are rising-in part to combat inflation,in part to defend domestic currencies against the strong U.S.dollar.Chinese authorities have lowered policy rates to boost the economy.Meanwhile,the Bank of Japan refuses to cave into market pressure.Regardless,investors and l
103、enders are becoming more selective,particularly toward the lower end of the credit scale.This implies financing conditions may further tighten.China slowing.Chinas intermittent lockdowns have dented consumption and economic activities.And the property sector slump has undermined market confidence.Wi
104、th real-estate related activity accounting for nearly a third of the countrys GDP,prolonged weakness will subdue economic growth.Earlier this year we cut our GDP growth forecast for China by 60-70 basis points(bps)to 2.7%in 2022 and 4.7%in 2023.30Asia-Pacifics Growth Outside China Should Soften In 2
105、023 On Higher Interest Rates And Weaker External DemandCredit Conditions:Asia-Pacific Note:For India,2021=FY 2021/22,2022=FY 2022/23,2023=FY 2023/24,2024=FY 2024/25,2025=FY 2025/26.Source:S&P Global Economics.(2)0246810AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew Zealand PhilippinesSingapor
106、eSouth KoreaTaiwanThailandVietnamAsia-Pacific(%year over year)20224202531Downside Risksand what they mean for the sectorWhat we expect for next 12 monthsCredit Conditions:Asia-Pacific Downside Risks Endure Macro headwinds.Slower economic growth,higher interest rates,tighter financial cond
107、itions and weaker currencies across many jurisdictions will increasingly strain borrowers and their lenders.High leverage.Highly leveraged corporate,household,and government sectors in many jurisdictions pose risks.Higher interest rates will particularly test banks mortgage portfolios in countries w
108、here leverage Is high.These jurisdictions include Australia,New Zealand,Thailand,Malaysia,and Korea.Property market stress in China.About 40%of Chinese developers are in financial stress.Defaults could rise.Also,a“mortgage repayment strike”by some borrowers,if not contained,could evolve into systemi
109、c riskStrain asset quality.Higher interest rates will boost net interest margins for most financial institutions(FIs).However,worse than anticipated headwinds would dampen credit demand,pressurize SMEs that are still healing from the impact of the pandemic,and push highly leveraged consumers to the
110、edge of default.Negative economic trend in New Zealand.Most banks across Asia-Pacific have some resilience at current rating levels,supported by capital buffers and buildup in provisioning coverage.While the standalone credit profiles of financial institutions in New Zealand may face greater challen
111、ges,systemically important banks still have stable outlooks being supported by highly rated parent banks.Increasing divergence.Given tougher conditions,the gap could potentially widen between relatively stronger and weaker FIs.Weaker economic growth and higher inflation could strain asset quality.We
112、 think banks will continue to be resilient indicated by stable outlooks on most banks.However,should economic and financing conditions deteriorate materially,negative ratings momentum would seem inevitable.Stand-alone credit profiles of financial institutions in New Zealand are more vulnerable to do
113、wnside risks.across the sector.Credit Losses Could Increase But For Most Countries Remain Below Our Expected Long-Term Average32Nonperforming Assets Will Remain Elevated In Some JurisdictionsAsset Quality Will Strain Note:Nonperforming assets as a%of systemwide loans(year-end).For India and Japan,20
114、20 refers to fiscal year ended March 31,2021.e-Estimate,f-forecast.Source:S&P Global Ratings.Note:Credit losses as a%of gross customer loans.E-Estimate,f-Forecast.For India and Japan,2020 refers to fiscal year ended March 31,2021.Source:S&P Global Ratings.0246810AustraliaChinaHong KongIndiaIndonesia
115、JapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailandVietnam%20022e2023f(1)01234AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailandVietnam%20022e2023fNIMs Recovering With Rising Interest Rates 33RoAA Are Yet
116、 To Fully Recover To Pre-COVID Levels For Most Banking Systems In The Region Earnings Yet To Recover To Pre-COVID Levels Note:Systemwide return on average assets(ROAA).For India and Japan,2020 refers to fiscal year ended March 31,2021.e-Estimate,f-forecast.2021 is an estimate for India.Source:S&P Gl
117、obal Ratings.Note:Net interest income(NIM)to average earning assets.eEstimate,f Forecast.For India and Japan,2020 refers to fiscal year ended March 31,2021.Source:S&P Global Ratings.0123456AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailand%2019
118、202020212022e2023f0123AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailandVietnam%20022e2023fChina:Sectorwide NPA Cover Remains ReasonableIndia:Sharp Polarization In The Performance Of Banks 34Asia-Pacific Banks Japan:Increasing Unreal
119、ized Losses On Foreign Bonds Gradually Weigh On Earnings Australia:Credit Losses To Remain Low Amid Orderly Correction In Property PricesNotes:Nonperforming assets(NPA)for China includes nonperforming loans,special mention loans,forborne loans,and other problematic loans that are overdue by 90 days
120、and classified as normal.BOI-Bank of India,BOB-Bank of Baroda,SBI-State Bank of India.Please note figures are for September 2022.RoAA-Return on average assets,NPL-Nonperforming loans.G-SIBs:Mitsubishi UFJ FG,Mizuho FG,Sumitomo Mitsui FG.Sources:Sources:Annual Reports of each financial group.3 Austra
121、lian Bureau of Statistics,Residential Property Price Indexes:Eight Capital Cities December 2021,S&P Global Ratings.020406080100(1)490224%Non-performing assetsCredit cost/average loansNPA provision coverage(%)SBIPunjab National BankBOBCanaraUnion Bank of India BOIIndian BankHDFC
122、 BankICICI BankAxis BankKotak Mahindra Bank0123400.511.522.5Net NPL%ROAA(0.5)0.00.51.01.5(20)(10)01020%Australian national house pricesCredit losses as a%of total loans(y2)(5,000)05,00010,000FY 2019(Mar.2020)FY 2020(Mar.2021)FY 2021(Mar.2022)Bil.Pre-taxnet profitsUnrealized profit/loss onholding sec
123、urities(all incld.FBs)Unrealized profit/loss onholding foreign bonds(FBs only)SSEA:COVID Still A Drag On Indonesia And Thailand Hong Kong:Fed Rate Hike Is Driving Fund Outflow And Higher HIBOR;Benefiting NIMs 35Asia-Pacific Banks Korea:High Household Debt Will Add Some BurdenTaiwan:Steady Asset Qual
124、ity,Better NIMs The loans under moratorium are based on S&P Global Ratings estimates and/or latest disclosures by banks,regulators,industry associations.SSEA-South and Southeast Asia.Source:Hong Kong Monetary Authority,Financial Supervisory Service,S&P Global Ratings.=0.5%=1.0%=2.0%6%9%10%New Zealan
125、d,AustraliaSingapore,IndiaHong Kong SAR,ChinaMalaysiaIndonesiaThailandLatest%of loans under moratorium or restructuring(%)0.00.20.40.60.81.01.220002020212022f2023f%Net interest marginPretax ROAALoan loss provision/avg.assets0.00.20.40.60.81.01.2020406080100120%Household debt as
126、%of GDP(left scale)Household nonperforming loan ratio(right scale)0300400500%Bil.HK$Aggregate balance(left scale)1-month HIBOR(right scale)36Latin AmericaCredit Conditions|Latin AmericaNote:The LatAm GDP aggregate forecasts are based on PPP GDP weights.f-Forecast.e-Estimate.Source:S&P Glo
127、bal Ratings.Most of the major Latin American economies performed better-than-expected in 2022,growing above-trend because of resilient domestic demand and an uptick in exports.We revised our 2022 GDP growth forecast for the region to 2.8%,from 2.0%previously.However,we expect these economies to shif
128、t into low-trend growth into 2023,as more challenging external dynamics weaken exports,and waning confidence takes a toll on domestic demand.We project Latin America to expand by 0.9%in 2023.Uncertainty over the trajectory of the U.S.economy,with a shallow recession now expected in the first half of
129、 2023,is a key downside risk to our GDP growth forecast for Latin America.GDP growth and S&P Globals forecasts(%)202020212022e2023f2024f2025fArgentina-9.910.43.31.02.32.0Brazil-4.24.92.50.62.02.1Chile-6.211.92.40.32.92.8Colombia-7.010.76.51.93.03.3Mexico-8.25.02.10.82.02.1Peru-11.013.52.22.53.13.3La
130、tAm 6-6.56.72.80.92.22.337 Latin American Banks38Key ExpectationsLatin American banks will likely face low credit growth in 2023 amid sluggish economic growth,and political uncertainty.Weak economic conditions,high inflation,and rising interest rates will pressure customers payment capacity and bank
131、s asset quality and profitabilityBanks will keep solid capitalization and sound liquidity,while profitability will likely slip from strong levels as provisioning needs rise and margins are pressured.Key AssumptionsWe expect nonperforming loans(NPLs)to continue weakening in 2023 while credit losses t
132、o remain manageable thanks to the good provisioning coverage.The likely weaker economic performance in 2023 and lower credit growth will push up the NPL ratio,but it should remain manageable thanks to banks conservative growth strategies.We expect consumer and middle market loans to drive asset qual
133、ity deterioration.Banks profitability should be pressured in 2023 but stay healthy.We expect provisioning needs will pick up as asset quality metrics worsen,while margins will take time to improve as loans take longer to reprice than funding sources.Both the shift in the credit portfolio toward high
134、er-margin loans(such as consumer lending)and banks ability to reprice their portfolios will support margins in the longer term.Key RisksSocial unrest and political instability could pressure investment and economic performance.Deteriorating global macroeconomic conditions could pressure the region.D
135、imming prospects for growth in the U.S.,Europe,and China,means that global trade is likely to soften,with negative implications for exports out of Latin America.Theres a growing risk of interest rates staying higher for longer,this could not only heighten market volatility but also make overall fina
136、ncing conditions tougher for speculative grade issuers,further pressuring smaller institutions in the region.Rising Interest Rates And Weaker Economy Will Pressure Asset Qualitya-Actual.e-Estimate.f-Forecast.NPA-Nonperforming assets.ROA-Return on assets.Source:S&P Global Ratings.0.01.02.03.04.00.05.
137、010.015.020.02021a2022e2023f2021a2022e2023f2021a2022e2023f2021a2022e2023f2021a2022e2023fBrazilColombiaChileMexicoPeru%Credit growth(left scale)NPA Ratio(right scale)ROA(right scale)39 Mexican nonbank financial institutions(NBFIs)have been hit hard by the pandemic,as seen in their weakening credit qu
138、ality andincreasing refinancing risk.In addition to the weaker economy,some of these entities face issues related to governance deficiencies and risk management,further complicated by the tough business and operating conditions for the sector.Moreover,with the rising interest rates,it will be diffic
139、ult for NBFIs to transfer higher rates to their borrowers while their funding costs increase,which is also happening at a time of moderate loan growth expectations.With the U.S.Fed effectively pledging to do whatever it takes to bring persistent inflation under control,there is a growing risk of int
140、erest rates staying higher for longer.We believe this could make financing conditions tougher for not only NBFIs but also small and midsized banks in the region.Latin American major banks are generally funded by retail deposits and do no rely on wholesale funding,but we are monitoring closely smalle
141、r institutions with short-term maturities as refinancing risk has increased materially in our view.40Tough Financing Conditions For Speculative Grade Issuers Puts Pressure On Wholesale Funded EntitiesRelated ResearchGlobal Bank Country-By-Country Outlook 2023,Nov.17,2023Banking Risk Indicators:Novem
142、ber 2022 Update,Nov.10,2022European Banks:The Agile Will Come Out Stronger,Nov.9,2022Sector And Industry Variables|Criteria Banks:Banking Industry Country Risk Assessment Update:October 2022,Oct.27,2022Potential Rating Implications Of The Proposed Rules To Resolve Large U.S.Regional Banks,Oct.24,202
143、2Top 100 Banks:A Modest Capital Erosion Is On The Cards,Oct.10,2022Bank Regulation And Disclosure To Foster Climate-Related Risk Analysis,Oct.3,2022Global Credit Conditions Q4 2022:Darkening Horizons,Sept.29,2022Asia-Pacific Banks Digital Opening Raises Cyber Risks,Sept.27,2022U.K.Banks Face The Wea
144、kening Macroeconomy From A Resilient Balance Sheet Position,Sept.21,2022European G-SIBs Monitor H1 2022,Sept.19,2022Only Chinas Government Can Revive Property Confidence,Sept.15,2022U.S.Financial Institutions CRE Asset Quality Is Resilient:Long-Term Risks Remain,Sept.7,2022Asia-Pacifics Nonbanks Bra
145、ce For Funding Squeeze,Sept.5,2022Exploring Crypto And DeFi Risks In Credit Ratings,June 30,202241Contacts42Western Europe ElenaIparraguirreMadrid+34-91-389-Latin America Cynthia CohenFreueBuenosAires+54-11-4891-CEEMEAMohamedDamakDubai+971-4372-Global Gavin GunningMelbourne+61-3-9631-GlobalEmmanuelV
146、ollandParis+33-1-4420-North America BrendanBrowneNewYork+1-212-438-GlobalAlexandre Birry London+44-20-7176-CEEMEA Natalia YalovskayaLondon+44-20-7176-Research ContributorsPriyal Shah,Mehdi El mrabetEditorAlison DunnDesignerHalie Mustow43Copyright 2022 by Standard&Poors Financial Services LLC.All rig
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