S&P Predicts Global Bank Losses Can Reach $1.8T

Credit rating agency S&P Global Ratings predicts that banks will lose $1.8 trillion in 2020 and 2021 combined, reported Live Mint. This is an improvement compared to its July 2020 forecast of $2.1 trillion.

For 2020 only, S&P shows that the losses will be S900 billion, which is a third lower than previous projections. Moreover, global banks are expected to sustain losses of $910 billion in the whole of 2021. This figure reflects a 10% increase from past estimates.

Osman Sattar, the credit analyst at S&P Global Ratings, said, “For 2022, we forecast credit loss will decrease slightly to around $870 billion, still well above recent pre-pandemic levels.”

S&P Predicts Global Bank Losses

“Indeed, we expect that 2019 marked the end of a multi-year period of benign credit losses for banks globally even as economies continue to recover from the pandemic,” he added.

The revisions show that there is a change in the timing, which could affect the months in the forecast period. The shift is caused by the pandemic, including the current debt moratoria and fiscal support.

Sattar also noted, “We expect major banks’ pre-provision earnings over the period will be able to absorb these credit losses with some headroom.”

S&P added that more surges are expected to affect bank ratings. Moreover, these financial institutions could “inevitably… incur net operating losses.” Forecasted loss in 2021 and 2022 are also expected to be volatile and higher than the base.

The agency also released figures for specific economies, with some significant forecasts in Ireland’s economy. According to the research, lending companies could still be under pressure in light of the global economic slowdown due to the pandemic.

Irish banks are also expected to face “structural and cyclical headwinds” at the start of 2021 because of last year’s slowdown that affected their operations.