20171206-穆迪服务-Banks_–_Global_2018_Outlook_43页_1mb

Moody's 2018 Outlook for Global Banking Sector

Core Content

Moody's 2018 Outlook for the global banking sector highlights a synchronous upturn in economic growth that will support stable creditworthiness across banking systems. However, low interest rates and high nonperforming loans (NPLs) will continue to weigh on profitability, while regulatory compliance and technological investments will keep operating expenses elevated.

Main Points

Global Economic Growth and Bank Creditworthiness

• Stable growth: Global banks will benefit from broad-based economic growth that started in 2017 and is expected to continue into 2018.
• GDP growth: The G20 economies are forecasted to grow at 3.2% in 2018, supported by accommodative monetary policy, resilient consumer and business sentiment, stable commodities prices, and recovery in global trade.
• Downside risks: Certain countries, including the UK, Brazil, Turkey, and South Africa, face challenges due to Brexit uncertainty, political instability, and economic slowdowns.
• China: Growth is expected to remain steady but will gradually slow.

Low Interest Rates and Leverage

• Low returns: Despite improved growth, bank profitability will remain subdued due to low interest rates and high NPLs in some jurisdictions.
• Monetary policy: Developed market central banks, such as the Fed and ECB, are expected to gradually tighten policy, with the ECB likely to start reducing balance sheet size only by 2020.
• Private sector leverage: Elevated levels of corporate and household debt in many regions pose a risk in the event of economic or interest rate shocks.

Asset Prices and Risks

• Housing prices: Significant increases in housing prices, driven by low interest rates, make households vulnerable to sharp corrections.
• Equity markets: Most equity markets have seen subdued price rises, with the US CAPE ratio significantly above historical trends.
• Asset correction risks: A sharp correction in asset prices could negatively impact consumer sentiment and financial conditions for affected firms.

Regulatory Landscape

• Basel III compliance: Regulatory capital and liquidity ratios are largely in place, but the implementation of IFRS 9 may impact reported capital ratios.
• MREL requirements: New rules on minimum requirement for own funds and eligible liabilities (MREL) will affect capitalization and impose burden-sharing on senior unsecured debt.
• PSD2 directive: The revised Payment Services Directive will increase competition and pricing pressure for incumbents, while also offering opportunities to become account information or payment initiation service providers.
• Resolution regimes: There is progress in aligning resolution frameworks with FSB standards, especially in jurisdictions with Global Systemically Important Banks (GSIBs). However, implementation is not yet complete, and some regions still rely on government support assumptions.

Key Information

Bank Ratings and Outlooks

• Stable ratings: Moody's bank rating outlooks are increasingly stable, with a focus on long-term creditworthiness rather than short-term volatility.
• Capitalization: Banks in most jurisdictions meet or exceed regulatory requirements, but capital improvements are expected to be marginal.
• Profitability: Low interest rates and high costs will continue to constrain profitability, especially in the EU and emerging markets.

Regional Outlooks

European Union

• GDP growth: The euro area is expected to grow at 2.0% in 2018, with most countries seeing stable or improving asset quality.
• Interest rates: ECB policy rates are not expected to rise until 2019, which will continue to constrain profitability.
• Banking Union: Progress on the Banking Union is slow due to political differences and regulatory fragmentation. The Single Resolution Fund is expected to reach 1% of covered deposits by 2023.
• Canadian banks: Face pressures from a new bail-in regime and high household leverage, which increases vulnerability to economic shocks.

North America

• US banks: Improved core profitability and asset quality, supported by favorable economic trends and strong revenue growth relative to expenses.
• Canadian banks: Experience a moderate decline in capital under stress scenarios, but strong fundamentals are expected to support creditworthiness.

Emerging Markets

• Positive growth: Emerging markets are expected to see positive macroeconomic growth, supported by stabilizing commodity prices and improved capital inflows.
• Private sector leverage: Elevated private sector indebtedness remains a key risk, especially in the event of economic slowdowns or interest rate increases.
• Diversification: Differentiation in creditworthiness across EM banking systems is expected, with some showing more resilience than others.

Conclusion

The global banking sector is set for a stable outlook in 2018, driven by improved economic growth and better capitalization. However, low interest rates, high NPLs, and rising private sector leverage will continue to constrain profitability. Regulatory and technological developments will further shape the competitive landscape, with a focus on cost management, compliance, and innovation. The EU banking union and resolution frameworks remain works in progress, while emerging markets benefit from macroeconomic stability but face structural vulnerabilities.