1、Primary contacts Gavin Gunning Melbourne+61-3-9631-2092 Emmanuel Volland Paris+33-14-420-6696 Alexandre Birry London+44-20-7176-7108 Secondary contacts Brendan Browne New York+1-212-438-7399 Cynthia Cohen Freue Buenos Aires+54-11-4891-2161 Elena Iparraguirre Madrid+34-91-389-6963 Osman Sattar London

2、+44-20-7176-7198 Mohamed Damak Dubai+9-714-372-7153 Contacts continued on page 106 Global Banks Country-By-Country Outlook 2024 Forewarned Is Forearmed November 16,2023 This report does not constitute a rating actionChart 1 Stable outlook trends but buffers may face a squeeze Rating and outlook dist

3、ribution Stable outlooksdominate at 79%Data as of Oct.31,2023.Source:S&P Global Ratings.Our outlook for the global banking sector for 2024 is for continuing ratings stability.We see limited potential for upside ratings momentum but several key risks that could negatively affect bank ratings should a

4、 downside scenario emerge outside our base case.Banks will face headwinds and uncertainties.The weak economic outlook will test banks,as will the CRE sector-which is enduring a significant downturn in some jurisdictions-and high public and public sector indebtedness amid high interest rates.We antic

5、ipate that most bank ratings will remain resilient in the face of these key risks unless they intensify materially or become more entrenched.0%10%20%30%40%50%AAAAAABBBBBBLower0%20%40%60%80%100%Asia-PacificEmerging EMEAEuropeLatin AmericaNorth AmericaCW NegativeNegativeStablePositiveKey takeaways Our

6、 outlook for global banks remains steady.As of Oct.31,2023,79%of bank ratingoutlooks were stable.This resilience is largely due to solid capitalization,improvedprofitability,and still sound asset quality.The weak economic outlook for 2024 will test banks business volumes,asset quality,and financing

7、conditions.Positively,most banks earnings will continue to benefit fromhigh interest rates.Key risks could intensify.Although not our base case,a marked deterioration ofeconomic conditions in Europe,the U.S.,and China is possible,while inflation remainshigh.The Russia-Ukraine and Israel-Hamas wars b

8、ring spillover risks.Commercial real estate(CRE)markets are suffering a significant downturn in somejurisdictions,with demand and prices falling,especially in the U.S.,China,and someEuropean countries.Related losses,although manageable,will be felt for a few years.We continue to anticipate increasin

9、g credit divergence.Pressure will be morepronounced for nonbank financial institutions(NBFIs)and entities with weak fundingprofiles or those directly exposed to geopolitical riskNov.16,2023 Global Banks Country-By-Country Outlook 2024|Forewarned Is ForearmedWe foresee the potential for increasing cr

10、edit divergence across the global financial landscape.While ratings on most financial institutions should remain unchanged the effects could be far from even from both geographic and sector perspectives.We anticipate that pressure will be more pronounced for NBFIs and entities with weak funding prof

11、iles or directly exposed to geopolitical risk.We note geopolitical risks are elevated,with some sovereign and bank rating actions recently occurring in the Middle East.2023 was somewhat of a watershed.Contagion concerns for banks hit levels not seen since the 2007-2008 global financial crisis(GFC)fo

12、llowing U.S.regional bank failures and the Swiss government-engineered acquisition of Credit Suisse by UBS in March 2023.Nine months on,the potential for contagion concerns to affect banks funding and liquidity profiles has decreased considerably.The events of March 2023,however,are a reminder of th

13、e importance of banks funding and liquidity management.Funding and liquidity will be no less important to our rating considerations during 2024,and on a permanent basis thereafter.Because of their typically lend long/borrow short asset and liability management profiles,banks can be highly sensitive

14、to confidence levels.The underlying causes of the U.S.regional bank sector difficulties and Credit Suisse were primarily idiosyncratic,rather than endemic.This primarily explains why the malaise affecting these banks did not spread more broadly.The health of the global banking sector also helped pre

15、vent contagion risks taking hold.Prudential standards across the sector have strengthened over the past 15 years based on lessons learned since the GFC.This enables the global banking community to better contend with major shocks.Some regulatory reforms remain a work in progress,and the occasional s

16、hock will undoubtedly continue to test the industry and result in new reforms.Potential changes to U.S.banking regulations affecting small banks are a case in point.We fully anticipate that governments and public authorities will continue to play a vital role.In response to the events of March 2023

17、authorities took swift and decisive action,especially liquidity support,thereby averting a potentially much larger predicament.This reinforces our view that occasional intervention by authorities is not only likely,but necessary,depending upon the gravity and urgency of a situation.Certain domestic

18、stresses persist,however.Some of these could yet prove to be more problematic.Deposit levels at U.S.banks continue to be under pressure.U.S.money market funds thus far are key beneficiaries,compared with U.S.banks,in the higher-for-longer interest rates environment and in the wake of stresses affect

19、ing the U.S.regional banks(see chart 2).This factor,along with the deteriorating CRE market,equates to an equally challenging outlook for U.S.banks in 2024,compared with 2023.The U.S.is far from the only banking system under pressure because of CRE.The unwind of the commercial property development s

20、ector in China will continue;and we anticipate higher credit losses across the banking sector.Furthermore,some European banking jurisdictions face increasing strains.Global Banks Country-By-Country Outlook 2024|Forewarned Is F 3Chart 2 U.S.deposit levels challenged in higher-for-longer rates environ

21、ment Higher-for-longer rates strain U.S.deposit levels(bil.US$)Sources:Federal Reserve.ICI.Banking Sector Stability Hinges On Four Key Risks While our outlook for the global banking sector is broadly stable in 2024,four key risks could change our view(see chart 3).At present,79%of bank ratings globa

22、lly are on stable outlook.Furthermore,across the 83 jurisdictions where we rate banks,we see economic risk trends as they affect banking sector creditworthiness as stable in 73 jurisdictions(see Banking Industry Country Risk Assessment Update:October 2023,published on RatingsDirect,Oct.31,2023).Char

23、t 3 Four key risks could hit bank ratings Deviation from our economic base case Emergence of material downside-including a full-blown recessionwith a sharp rise in unemployment and increasing geopolitical risks.Greater property sector deterioration Acceleration of weakness in CRE markets,ultimately

24、hurting banks asset quality more than anticipated.High corporate and government-sector leverage This could exacerbate corporate insolvencies and trigger lower government support for the real economy.Digitalization,climate change,and cyber to challenge banks business models and risk management Nontra

25、ditional risks add to the usual credit,market,funding,and operational risks.Source:S&P Global Ratings.17,000 17,100 17,200 17,300 17,400 17,500 17,600 17,700 17,800 4,200 4,400 4,600 4,800 5,000 5,200 5,400 5,600 5,800Feb.Mar.Apr.May.Jun.Jul.Aug.Sep.Oct.Total net assets-allmoney market fundsDeposits

26、,all commercialbanks,not seasonallyadjusted(right scale)Global Banks Country-By-Country Outlook 2024|Forewarned Is F 4 High-For-Longer Interest Rates Will Test Banks Higher interest rates have benefited banks net interest margins thus far.The effect on bank profitability over the next 12-24 months w

27、ill be mixed,however.The negative effect on bank borrowers from weaker economic growth and high interest rates will progressively contribute to higher credit losses.For 2024 we forecast US$824 billion in credit losses for global banks,a 6.3%increase compared with 2023.For 2025 we forecast credit los

28、ses of US$859 billion,a further increase of 4.2%compared with 2024(see chart 4).We believe that most banks can contend with higher credit losses in 2024 and 2025 at current rating levels,albeit that ratings headroom will decrease for some.By contrast,a recessionary downside scenario materially outsi

29、de our base case including our most recent economic forecasts would undoubtedly cause negative ratings momentum to occur in(for our latest global economic forecasts refer to Global Economic Outlook Q4 2023:Nearing The Rate Plateau,Sept.27,2023).We estimate that the top-200 rated banks represent abou

30、t two-thirds of global bank lending,and our base-case forecasts show median credit losses of about 17%of pre-provision earnings 2023 and in 2024.This indicates that credit losses would need to be more than 5x higher than we forecast before such losses would deplete bank capital rather than earnings.

31、Chart 4 Global banking sector credit losses will increase Domestic credit losses by region,2019 2025(bil.US$)Data shown on a constant currency basis,based on 2022 year-end exchange rates.Data for China relates to commercial banks.a-Actual.f-Forecast.Source:S&P Global Ratings.Potential secondary effe

32、cts in the higher rates environment are also on our radar.As interest rate and foreign exchange derivatives reset and reprice,our base case is that banks will satisfactorily manage derivative risks.Furthermore,while the call feature of many hybrid capital instruments is optional for the issuer,inves

33、tors are accustomed to hybrids being called.Higher interest rates are a reminder that the call feature gives issuers flexibility to manage the timing and cost of refinancing.We note that to date these risks have been well managed across the sector.-10001002003004005006007008009001,0002019a2020a2021a

34、2022a2023f2024f2025fRest of the WorldLatin AmericaWestern EuropeNorth AmericaAsia-Pacific(excl.China)ChinaGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 5 Property Sector Risks Intensify Property risk levels are high and trends worsening in numerous banking jurisdictions.For the U.S.ba

35、nks,CRE is a key risk factor heading into 2024.A sensitivity analysis by S&P Global Ratings in June 2023 concluded that a 10%CRE loss rate should be manageable for rated banks without heavy CRE exposure,noting that a significant rise in CRE losses could lead to heightened confidence sensitivity and

36、deposit outflows.For rated U.S.banks with more than 30%CRE exposure,a 10%loss rate would equate to 29%of capital,versus 12%for all banks.This represents a much bigger hit and could lead to downgrades for some banks.There is a higher proportion of negative outlooks on U.S.banks compared with our regi

37、ons.Chart 5 Sensitivity chart:All FDIC bank CRE losses to tier 1 capital FDIC-Federal Deposit Insurance Corporation.Excludes owner-occupied.Data as of March 31,2023.Sources:FDIC data and S&P Global Ratings.Similarly,a worsening property sector is a major contingency for the Chinese banking sector.Th

38、e unwind across the property developer sector in China is a work in progress,with national property sales remaining under pressure(see chart 6).A recent S&P Global Ratings downside scenario for China(to which we assigned a 1-in-5 probability)assumed a further 20%-25%decline in 2024 property sales fr

39、om 2022-causing Chinas real GDP growth to drop to 2.9%in 2024 from our base case of 4.4%.Under these conditions,we expect the nonperforming asset(NPA)ratio of Chinese commercial banks to increase to 6.1%in 2023,7.0%2024,and 6.0%in 2025.This compares with our July 2023 estimates of 5.4%,5.0%,and 5.0%

40、,respectively.This will push up annual credit losses to Chinese renminbi(RMB)2.9 trillion over 2023-2025,18%above our previous estimate of RMB2.4 trillion.05101520253005001,0001,5002,0002,5003,0006%10%15%20%(%)(Bil.US$)Loss rateBank CRE loans outstandingTier 1 capitalLossesLosses as%of capital(right

41、 scale)Global Banks Country-By-Country Outlook 2024|Forewarned Is F 6Chart 6 National property sales continue to fall Total sales(tril.RMB)RMB-Chinese renminbi.e-Estimate.Sources:National Bureau of Statistics of China,S&P Global Ratings.Residential mortgage lending performance is mixed in the curren

42、t higher rates environment.There is significant variation between and within banking jurisdictions noting that many countries are holding up well so far.Increasingly,higher rates are stretching some cohorts of residential borrowers.Most noteworthy among these are recent,fully extended,first-time bor

43、rowers.High household sector leverage for some jurisdictions(see chart 7)adds an element of vulnerability.Low unemployment levels,and strong regulatory standards help alleviate concerns.Chart 7 Higher interest rates will test indebted households Household debt as a percentage of GDP,selected jurisdi

44、ctions(%)f-Forecast.Source:S&P Global Ratings.0246810121416182020072008200920102011201220132014201520162017201820192020202120222023e2024e020406080100120140ChinaU.S.U.K.NewZealandSouthKoreaAustraliaCanadaSwitzerland20192020202120222023f2024f2025fGlobal Banks Country-By-Country Outlook 2024|Forewarned

45、 Is F 7High Leverage Is A Key Risk High-for-longer-than-anticipated interest rates against an already-high leverage backdrop is a key risk for banks.Leverage across the nonfinancial corporate and government sectors is at near record highs(see chart 8;and Global Debt Leverage:Is a Great Reset Coming?

46、,March 20,2023).Reinforcing our risk assessment is that leverage is much higher than prior to the GFC.Leverage spiked during the COVID-19 pandemic(as governments and corporates borrowed heavily to support cash flows).Our assessment primarily considers that high corporate leverage could cause more co

47、rporate insolvencies,while high government leverage could diminish the capacity(if not willingness)of some sovereigns to provide ongoing support to real economies and thereby bank borrowers.It could also limit the capacity of some sovereigns to provide extraordinary support to certain banking jurisd

48、ictions(if extraordinary support was required).Chart 8 Global leverage is higher than the pre-GFC and pre-COVID-19 level Debt-to-GDP leverage of global sectors(%)Source:Institute of International Finance.Structural Risks Are In The Mix Cyber risk is a systemic threat for banks,given the financial se

49、ctors interconnectedness,and its heavy reliance on technology.It likewise has the potential to hit individual institutions(see Cyber Risk Insights:European Banks IT Complexity Amplifies Risk,March 23,2023,and Australian Mutual Lenders:Path Of Least Resistance May Lead To Higher Cyber Risk,Aug.29,202

50、3).Guidewire data shows that banks face relentless cyberattacks but that most banks have strong defenses to counter such threats.Evolving regulatory frameworks lead us to anticipate that banks will continue to incur high ongoing costs to counter cyber risks.020406080100120GovernmentHouseholdsFinanci

51、al CorporatesNonfinancialcorporatesJune 2007June 2019June 2020June 2022June 20230100200300400TotalGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 8New financial technologies have not to date been a meaningful ratings differentiator across the global banking industry.The potential for st

52、ep changes in financial technologies means this could yet happen.We believe that digitalization of goods and services,distributed ledger technologies powering decentralized finance,virtual banks,and most recently artificial intelligence have the potential to transform banks business models.The envir

53、onmental,social,and governance concerns of investors,government policymakers,and other stakeholders will continue to shape banks policies and behavior.While climate change alone will have a limited direct impact on banks over the next several years,banks are integral in financing the climate transit

54、ion across many industries.Banks regulatory stress-testing,prudential frameworks,and disclosure standards increasingly factor in climate-related risks(see Bank Regulation And Disclosure To Foster Climate-Related Risk Analysis,Oct.4,2022).Bank Buffers Are Better And Stronger Our base case is that str

55、ong bank balance sheets and improved risk management will help buffer banks against economic obstacles.This in turn will contribute to ratings stability at current levels.Most banks are much better capitalized and have greater asset quality since the GFC.The risk management of banks has also improve

56、d following global regulatory reforms led by the Basel Committee on Banking Supervision.Capitalization is stronger.For the largest global banks(Bank for International Settlements group one),Tier-1 capital ratios have doubled to about 16%over the past 10 years(see chart 8).Stronger capitalization imp

57、roves market and investor confidence in banks ability to contend with negative events and helps banks navigate tough operating conditions.Chart 9 Stronger capital since the GFC adds to banks buffers Tier 1 ratios by region,group 1 banks(%)The graph shows the fully phased-in initial Basel III framewo

58、rk for the data points up to and including the end of 2018 and the actual framework in place at the reporting date for all data points thereafter.Source:Basel Committee on Banking Supervision.05101520201120122013201420152016201720182019202020212022EuropeAmericasRest of the worldGlobal Banks Country-

59、By-Country Outlook 2024|Forewarned Is F 9Asset quality is sound across developed banking markets.NPAs as a percentage of systemwide loans currently average only about 1%in certain of the largest developed banking systems(see chart 9).We consider banks in these and many other jurisdictions to have ro

60、om to absorb a reasonable weakening in asset quality metrics,with no immediate negative rating impact.Chart 10 NPAs are sound but will increase in an economic downside Nonperforming assets as a percentage of systemwide loans,selected G20 jurisdictions(%)NPA-Nonperforming assets.e-Estimate.f-Forecast

61、.Source:S&P Global Ratings.How Much Stronger?Current rating levels reflect strong balance sheets and improved regulation and risk management;however,we anticipate that further tests of resilience will occur.Although banks capitalization has increased-and the banking industry is heavily regulatedand

62、supervised-banks remain more highly levered than corporates.Global system-wide leverage is high.High leverage provides a more fractious backdrop andoperating environment for the confidence-sensitive banking industry.The world is moreindebted-and hence riskier.Key economic,geopolitical,and other risk

63、 factors for banks will intensify in a downsidescenario,compared with our current base case scenario.This would hurt banks asset qualityand other rating factors,and more generally erode banking sector creditworthiness.Emerging risks and opportunities affecting banks,such as digitalization and new fi

64、nancialtechnologies,could transform the industry.Maintaining the momentum of the past 10-15 years of improvement will be tough.Banks face an increasing range and intensity of new and emerging risk factors.Now that banks balance sheets are stronger,we anticipate that the regulatory focus will pivot e

65、ven more in the direction of prominent emerging and varied risk types including cyber risk,climate risk,and velocity of funds transmission.0123456782008 2009 2010201120122013201420152016201720182019 202020212022 2023f 2024fGermanyJapanU.S.U.K.Global Banks Country-By-Country Outlook 2024|Forewarned I

66、s F 10Credit Divergence Will Continue Economic,geopolitical and other factors cause us to anticipate further credit divergence between stronger and weaker financial institutions.Tests may be trickier for NBFIs than banks.NBFIs typically are much less diversified,can be more reliant on market funding

67、,and often do not benefit from access to central bank liquidity.The recent year or so has already been tough for some NBFI segments.We continue to monitor the evolution of the private credit market.Principally,we are cautious about the impact on financial system risks from NBFIs taking a progressive

68、ly larger share of lending from banks.As bank regulations have tightened over the past decade,unregulated or less regulated NBFIs have gained market share.These institutions account for about half of global financial assets,according to the Basel-based Financial Stability Board(FSB).This compares wi

69、th about 42%in 2008.Regulators are monitoring risks from nonbank entities,and may expand their reform and coverage.Emerging market banks face inevitable tests.Downside risks that could hit emerging market banks are significant and include heightened geopolitical risks from the Hamas-Israel war,and d

70、oubts about a resolution of the Russia-Ukraine war(see Emerging Markets Monthly Highlights:Turbulence Abroad Will Fuel Uncertainty,Oct.20,2023).We anticipate increased credit differentiation between stronger,systemically important financial institutions versus non-systemically important financial in

71、stitutions in some emerging market jurisdictions.These include China and India.Banking Industry Country Risk Assessments(BICRA)The strengths and weaknesses of an economy and its banking industry are critical factors that underpin the creditworthiness of a countrys financial institutions.We distill t

72、his analysis into a Banking Industry Country Risk Assessment(BICRA).The BICRA is designed to evaluate and compare global banking systems.BICRAs are grouped on a scale from 1 to 10,ranging from what we view as the lowest-risk banking systems(group 1)to the highest-risk(group 10).A BICRA analysis for

73、a country covers all rated and unrated financial institutions that take deposits,extend credit,or engage in both activities.The analysis considers the relationship of the banking industry to the financial system,and furthermore to its sovereign.The BICRA methodology has two main analytical component

74、s:economic risk and industry risk.Notes On The Country Outlooks Every country outlook one-pager contains a link to the BICRA report or the general media release of the latest BICRA actionat the top right corner.The data in the right columns of the one-pagers are rounded to one decimal place.NPA rati

75、o:The ratio reflects nonperforming assets as a percentage of system-wide loans.NPAs include the sum ofproblematic exposures(including loans and foreclosed assets)due by private and public borrowers to a countrys financialinstitutions.The definition of problematic exposures varies by country.The gene

76、ral standard is that exposures past due formore than 90 days are classified as nonperforming.In some jurisdictions this also includes exposures that are up to date intheir payment obligations but that run the risk of becoming delinquent.For some countries in Europe,we use nonperformingexposure,based

77、 on the definition of the European Banking Authority.For several countries,nonperforming assets are notavailable.In such cases,we therefore use nonperforming loans.Global Banks Country-By-Country Outlook 2024|Forewarned Is F 11Country Outlooks p.13p.17North America Latin America p.34p.61Europe Emerg

78、ing EMEA p.82Asia-Pacific Note:83 countries are included in the report.Countries are listed in alphabetical order by region.Global Banks Country-By-Country Outlook 2024|Forewarned Is F 12North America Global Banks Country-By-Country Outlook 2024|Forewarned Is F 13Bermuda|BICRA group:5 High Rates Wil

79、l Lead To Increasing Loan Losses Key takeaways Bermudas economy is slowing somewhat,but the international business sector and rebounding tourism continue to drive growth.We expect losses to rise modestly in banks loan portfolios due to high rates and asaffordability becomes a bigger issue.We expect

80、banks will keep operating with very strong capitalization and sound liquidity.Key credit drivers Asset quality will deteriorate.We expect credit losses to increase modestly as borrowers struggle with higher rates.Real estate prices could stabilize.Bermuda continues to experience a correction in its

81、real estate sector;however,we believe home prices could stabilize given the shortage of homes in the country.Key assumptions Economic activity will slow.We expect GDP growth to be around 2.0%in 2023 and to average 1.0%in 2024 and 2025,after strong growth of 3.3%(estimated)and 5.4%in 2022 and 2021,re

82、spectively.Local employment dynamics will weigh on banks asset quality and profitability.Liquidity and capitalization ratios will remain solid.Bermudian banks will keep operating with ample liquidity(average loan-to-deposit ratio of 38%at year-end 2022)and sound capitalization.The sectors aggregate

83、common equity Tier 1 ratio was 22.4%at year-end 2022.Loan growth will be flat or down.Loans have,in general,been declining in Bermuda over the past few years,causing some banks to seek growth opportunities abroad.We expect Bermuda-based loan growth to continue to decline and loan growth outside of t

84、he country to be limited.What to look for over the next year Bermuda should maintain its appeal as an international financial center.The international business sector continues to support the economy.We expect any tax changes Bermuda implements will ensure that its economy-and this sector in particu

85、lar-remain competitive.Stronger tourism will also be key to boosting employment.Tourism is returning,which could boost employment,because we view tourism as a significant generator of jobs.Primary Credit Analyst Lidia Parfeniuk Canada Loan growth Sector-average growth in loans.0.0%2024 forecast 1.0%

86、2023 estimate3.4%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.4.8%2024 forecast 4.9%2023 estimate 5.1%2022 actual RoAA Sector-average return on average assets.1.9%2024 forecast 2.0%2023 estimate 2.2%2022 actual Figures as of fiscal year ending December.Read latest reportGloba

87、l Banks Country-By-Country Outlook 2024|Forewarned Is F 14Canada|BICRA group:2 Rising Provisions Pressure Operating Performance Key takeaways Elevated interest rates continue to pressure Canadian banks asset quality,which will lead to increased but manageable net charge-offs(NCOs)in 2024.Loan growth

88、 will continue to moderate as demand dampens due to high rates.Banks operating performance is under pressure as funding costs remain elevated andprovisions rise.Key credit drivers Interest rates are likely nearing a peak.Affordability pressures are mounting as households renew mortgages and debt ser

89、vicing costs rise.We expect elevated interest rates to continue to pressure banks credit quality and loan growth in 2024,although we think rates are nearing a peak.Banks will maintain adequate capital ratios.Conservative capital management leaves banks well positioned to withstand economic uncertain

90、ty.Effective Nov.1,2023,domestic systemically important banks(DSIBs)must maintain a minimum common equity Tier 1 ratio of 11.5%,up 50 basis points from the current level.We believe DSIBs will exceed this minimum,and their S&P Global Ratings risk-adjusted capital ratios will remain in our adequate ra

91、nge of 7%-10%.Key assumptions Credit quality will deteriorate from very strong levels.We expect this weakening as elevated interest rates affect clients ability to service their debt.Savings amassed during the pandemic have shrunk significantly,and we expect unemployment to rise modestly in 2024.Thi

92、s will cause NCOs to rise from very low levels,though we expect them to remain manageable.Banks are also holding more capital amid economic uncertainty.Loan growth will slow.Elevated rates will decrease demand for loans.The mortgage market in Canada,in particular,has slowed,with most banks expecting

93、 low single-digit mortgage growth in 2024,with overall loan growth in the mid-single digits.What to look for over the next year Funding price pressures continue.We expect pressure on net interest margins to continue as migration to interest-bearing deposits has raised deposit pricing.At the same tim

94、e,once interest rates top off,price pressures should ease.Banks maintain diverse funding sources,which we expect will help keep liquidity metrics stable.Operating performance is under pressure.A deteriorating economic outlook is leading to higher provisions for loan losses.Expense management will al

95、so be important for most banks as lingering inflation could cause expense growth to outpace revenue growth in 2024.Primary Credit Analyst Lidia Parfeniuk Canada Loan growth Sector-average growth in loans.5.0%2024 forecast 6.0%2023 estimate14.6%2022 actual NPA ratio Nonperforming assets as a%of syste

96、m wide loans.0.6%2024 forecast 0.5%2023 estimate 0.4%2022 actual RoAA Sector-average return on average assets.0.8%2024 forecast 0.7%2023 estimate 1.0%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 15U.S.|BICRA grou

97、p:3 Banks Operating Cautiously Amid Higher-For-Longer Interest Rates Key takeaways The banking industry has found greater stability following bank failures in March and April2023,and we expect banks in aggregate to remain profitable and build capital in 2024.Still,potential further declines in depos

98、its,rising funding costs,unrealized losses,CREexposures,and economic uncertainty are key risks.Regulators have proposed important changes to capital and resolution requirements and will likely call for further updates to supervision and regulation in the wake of the failures.Key credit drivers Econo

99、mic performance will be below potential.S&P Global economists expect a resilient U.S.economy to avoid recession but to endure a multi-quarter period of sub-potential growth.Under this view,monetary policy rates and financial conditions will be tighter for longer.High interest rates will weigh on ear

100、nings.High rates initially lifted earnings but are now hurting NII and have led to unrealized losses on assets.Rates may also have a rising impact on asset quality.Funding and liquidity will weaken.If the Federal Reserve continues to quantitatively tighten,deposits and liquidity in the banking syste

101、m could gradually decline further in 2024.Key assumptions Rated banks will avoid unmanageable deposit outflows.While deposits have declined and funding costs have risen in 2023,we do not believe the banks we rate are seeing sharp deposit outflows.They also will likely conserve liquidity with muted l

102、oan growth.Profitability will remain reasonably strong,and banks will build capital.While NII may decline in 2024,we expect banks to generate a return on common equity of 9%-11%in 2024 and to build capital through earnings retention,particularly as they plan for more stringent capital regulation.Ass

103、et quality pressure will increase but remain manageable.Most asset quality measures have been normalizing.While we expect further weakening in 2024,we believe banks pre-provision earnings generally place them well to absorb the associated credit losses.What to look for over the next year Updates to

104、supervision and regulations.Regulators have proposed strengthening capital and resolution planning requirements for banks with more than$100 billion in assets.They may finalize those proposals and make further proposals pertaining to liquidity regulations and other topics.The Feds ability to reduce

105、inflation and long-term rates.The Fed has made some progress in slowing inflation.However,it is unclear if its rate increases to date will be enough to reduce inflation to its target.Long-term rates,such as the 10-year Treasury rate,are also near multi-year highs.CRE maturities.We expect areas of CR

106、E lending to face challenges,especially in the office market.While most rated banks are positioned to handle the risk,loans maturing in 2024 and 2025 may add to asset quality and confidence sensitivity risks.Primary Credit Analyst Brendan Browne New York Loan growth Sector-average growth in loans.2.

107、0%2024 forecast 1.5%2023 estimate8.7%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.1.3%2024 forecast 1.2%2023 estimate 1.1%2022 actual RoAA Sector-average return on average assets.1.1%2024 forecast 1.2%2023 estimate 1.1%2022 actual Figures as of fiscal year ending December.Rea

108、d latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 16Latin America Global Banks Country-By-Country Outlook 2024|Forewarned Is F 17Argentina|BICRA group:9 Significant Challenges Stemming From Sovereign Conditions Key takeaways Argentinas banking industry is hampered by signif

109、icant challenges at the sovereign level,limiting our ratings on financial entities.To withstand volatility and adverse operating conditions,the system maintains high liquidity,but mostly through central bank securities and government bonds.Still,thesystem has good regulatory capitalization metrics c

110、onsidering its asset mix.Profitability will remain heavily reliant on central bank holdings and government securitiesamid sluggish loan originations and very high inflation.Asset quality metrics remain manageable,given lenders focus on less risky segments and satisfactory provisioning levels.Key cre

111、dit drivers The sovereigns weak fundamentals continue to constrain the ratings on financial institutions.Macroeconomic and policy factors in Argentina have exacerbated distortions in the domestic financial system.Very high inflation and reference rates,subdued credit demand and investments,and cauti

112、ous lending have crimped loan growth in real terms,with an increasing exposure to central bank instruments and government bonds.Banks keep high liquidity and regulatory solvency to cope with volatility.Banks maintain high regulatory capital metrics amid low credit growth,greater weight of liquid ass

113、ets,and moderate dividend distributions.Key assumptions Banks continued to generate profitability in real terms,despite very high interest rates.Results in the upcoming months will be highly influenced by inflation and interest rates.For 2023,we expect the industrys average return on assets to be ab

114、out 3.0%,compared to 1.9%in 2022,with banks relying on securities to compensate for the countrys triple-digit inflation.Asset quality metrics will stay manageable.Although loan growth has been below inflation,we expect the system to keep credit losses manageable.As of July 2023,nonperforming loans a

115、ccounted for 3.0%of total loans,with higher delinquency among public banks(4.9%)than private ones(1.8%).Although we expect metrics to weaken as purchasing power falls,metrics and losses should remain manageable,given banks good levels of provisions.What to look for over the next year Economic and po

116、litical developments could weigh on banks.Our BICRA for Argentina has a negative industry risk trend,incorporating the potential impact that adverse developments at the sovereign level could have on the financial systems funding and credit fundamentals.Were closely monitoring political and economic

117、developments related to the current presidential elections,as well as sovereign debt dynamics and their influence on financial institutions.Primary Credit Analyst Ivana Recalde Buenos Aires Loan growth Sector-average growth in loans.130%2024 forecast 98%2023 estimate68%2022 actual NPA ratio Nonperfo

118、rming assets as a%of system wide loans.3.4%2024 forecast 3.3%2023 estimate 3.1%2022 actual RoAA Sector-average return on average assets.2.0%2024 forecast 3.0%2023 estimate 1.9%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewar

119、ned Is F 18Bolivia|BICRA group:10 Unstable Economic Conditions And Government-Mandated Lending Heighten Credit Risks Key takeaways Risks in the domestic financial system from the pandemics effects remain but should start receding in the first half of 2024.Government-directed lending will continue to

120、 pressure the banking industrys profitability.The government will continue to struggle to manage fiscal and external vulnerabilities.Key credit drivers Unstable macroeconomic conditions weigh on asset quality.Increasing economic challenges during 2022 and the first half of 2023 pushed up risks in th

121、e Bolivian financial system by widening credit losses and pressuring profitability and capital.Moreover,although the banking system has lowered its exposure to dollar-denominated loans and deposits in recent years,we still think the deterioration in the countrys external conditions could weaken the

122、domestic financial industry.Directed lending narrows profits.Mandated lending is likely to continue intensifying competition and depressing margins among domestic banks.This is because the law regulates ceilings on lending rates and requires banks to comply with minimum credit quotas aimed at low-in

123、come homebuyers and productive sectors such as agriculture,mining,manufacturing,and tourism.Key assumptions GDP growth to slow.We forecast Bolivias economic growth to slow to about 2.0%in 2023 and 2.5%in 2024.In particular,private investment and foreign direct investment will likely remain low.Manag

124、eable though rising credit losses.We think banks credit losses will continue to grow after the government lifted pandemic-related debt moratorium policies,with losses peaking in 2023 and then starting to fall in 2024.However,the impact should be manageable thanks to banks conservative provisioning p

125、olicies and high share of collateralized loans.Still,stiff lending competition and underwriting standards could result in further credit losses in upcoming years.What to look for over the next year Role of the administration.The government still has to confront Bolivias weak public institutions,high

126、 corruption levels,and high political polarization-an obstacle to fiscal consolidation.It also has to address external vulnerabilities amid soft exports of natural gas and weaker public confidence in the sustainability of the exchange rate regime.Companies high debt and banks lending concentration.R

127、egulatory lending quotas and interest rate caps have encouraged rapid credit growth among the productive sectors,which has resulted in high debt levels.In addition,Bolivian laws encourage increasing lending volumes and concentration in cyclical sectors with large loans and longer durations for banks

128、 to meet targets,which could ratchet up credit risks in the system.Primary Credit Analyst Joaquin Jolis Buenos Aires Loan growth Sector-average growth in loans.7.0%2024 forecast 2.5%2023 estimate 7.5%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.1%2024 forecast 3.3%2023 esti

129、mate 2.2%2022 actual RoAA Sector-average return on average assets.0.7%2024 forecast 0.6%2023 estimate 0.6%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 19Brazil|BICRA group:6 Resilient Operating Performance Thanks

130、 To High Provisioning Coverage Key takeaways Credit growth will remain muted in 2024 due to banks low appetite for retail unsecured credit,low demand from corporates,and soft economic performance.We expect asset quality metrics to start stabilizing by the end of 2023 and to fall in 2024as loans issu

131、ed under stricter underwriting practices become more relevant.Operating performance will likely remain solid thanks to banks good provisioningcoverage,business diversification,and high margins.Key credit drivers We expect nonperforming loans to start stabilizing by the end of 2023 and to fall in 202

132、4.This should occur as new vintages with stronger performance come to represent a higher share of total loans,thanks to banks stricter underwriting practices.Credit losses should remain manageable thanks to good provisioning coverage.Profitability has been resilient and continues to benefit from ban

133、ks business diversification,including via insurance and asset management.Although provisions have picked up,pressuring operating performance this year and next year,profitability will remain sound compared with international peers thanks to banks high margins.Key assumptions Brazils economy should e

134、xpand 2.9%this year amid strong agricultural production and the continued impact of fiscal stimulus measures on household spending.We expect growth to slow to 1.2%in 2024 as those factors become less supportive.Lending growth should remain 6%-10%in 2023 and 2024.Credit demand from the corporate sect

135、or should remain modest alongside banks lower risk appetite in the retail unsecured segment.Soft economic performance in 2024 will contribute to maintaining slower credit growth.What to look for over the next year Risks remain that an inadequate policy framework and poor implementation results could

136、 limit economic activity and investment decisions,further squeezing banks asset quality and lending growth.A deterioration in policy signaling could also affect foreign direct investment inflows and,as a result,weaken Brazils strong net external position.Historically,government-owned banks strategic

137、 direction and risk appetite have changed according to the political parties in power,and we think the current government could maintain this approach.However,the implementation of the State-Owned Company Act in 2017 significantly improved these banks governance,promoting greater transparency in dec

138、ision-making processes and limiting political appointments to banks executive positions.Primary Credit Analyst Cynthia Cohen Freue Buenos Aires Loan growth Sector-average growth in loans.8.0%2024 forecast 8.0%2023 estimate14.2%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.6%

139、2024 forecast 3.6%2023 estimate 3.0%2022 actual RoAA Sector-average return on average assets.1.4%2024 forecast 1.4%2023 estimate 1.5%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 20Chile|BICRA group:3 Weak Politic

140、al Consensus Pressures Economic Prospects Key takeaways On Oct.19,2023,S&P Global Ratings revised its outlook on Chile to negative from stable on weaker political consensus on key parameters of the countrys political and economic agenda,which over time will weigh on Chiles capacity to grow and poten

141、tially weaken its credit quality.The trend for economic risk in Chiles Banking Industry Country Risk Assessment is negative,reflecting that following the conclusion of the constitutional redrafting process,political impasses could persist,hampering meaningful legislation to strengthen economic prosp

142、ects and investment.So far banks have performed strongly,but asset quality metrics and profitability are weakening due to persistently high interest rates and weak economic performance.Key credit drivers We expect asset quality indicators will keep deteriorating but remain manageable.Nonperforming l

143、oans were at 1.9%as of June 2023.We expect metrics to remain under pressure as economic conditions remain weak and interest rates,though decreasing,remain high.We expect banks profitability to come under pressure in 2023 and 2024.It has been sound in the past two years thanks to low provisioning nee

144、ds and improved margins that benefit from higher inflation,given that banks tend to have long positions in inflation-adjusted assets.However,we think weaker asset quality will lead banks to raise provisions,which will weigh on profitability.Key assumptions Credit growth will likely remain modest ami

145、d sluggish economic growth and uncertainty about several government reforms still being discussed.Chilean banks risk appetite remains restricted as they protect their balance sheets,while low investment is leading to lower demand from the corporate sector.Implementation of the new banking law to ali

146、gn to the Basel III framework is still in progress.The implementation of Basel III began in 2020 and will be completed in 2025.We believe banks are well prepared to keep up with the higher capital requirements,including the progressive implementation of deductions and buffers.What to look for over t

147、he next year Political impasses may persist,preventing agreement on meaningful legislation to strengthen economic prospects and investment.Weaker economic prospects could further pressure asset quality metrics and banks operating performance.In March and July 2024,banks will have to face the expirat

148、ion of the FCIC for amounts that represent about 5.4%and 3.2%of their total liabilities,respectively.The Financing Facility Conditional on Increased Lending(FCIC)is a facility offered by the central bank as part of its actions to ensure credit and payment chain continuity during the pandemic.Since J

149、anuary 2023,banks have started to replace the guarantees of these facilities with eligible liquid assets gradually over 18 months.Primary Credit Analyst Cynthia Cohen Freue Buenos Aires Loan growth Sector-average growth in loans.7.0%2024 forecast 4.0%2023 estimate 10.0%2022 actual NPA ratio Nonperfo

150、rming assets as a%of system wide loans.2.2%2024 forecast 2.1%2023 estimate 1.7%2022 actual RoAA Sector-average return on average assets.1.1%2024 forecast 1.1%2023 estimate 1.5%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewar

151、ned Is F 21Colombia|BICRA group:6 Economic Headwinds Will Pressure Asset Quality And Undermine Profits Key takeaways Colombias economic growth will remain below trend in 2024,due to persistently high interest rates.This will limit credit demand,particularly from households.Higher household debt and

152、deteriorating purchasing power,still weak labor market dynamics,and elevated rates will erode asset quality beyond cyclically low levels.We expect macro policy continuity as the government implements social reforms.Key credit drivers After rapid growth of household debt,banks asset quality is weaken

153、ing.High interest rates and elevated inflation is weakening households purchasing power.The latter-along with subdued credit growth in 2023,although slightly recovering in 2024-will pressure banks asset quality metrics.Increasing provisions and high funding costs will pressure profitability.Weakenin

154、g asset quality will require banks to increase provisions.However,we believe banks maintain credit loss reserves in excess of nonperforming assets,which could cushion the impact on profitability.Moreover,because banks need to comply with the 100%regulatory net stable funding ratio,the strong competi

155、tion for retail and time deposits will create additional pressure on interest expenses.Large banks expansion to Central America.This expansion provides business diversification but pressures capitalization.Moreover,the appreciation of the Colombian peso is affecting profits,given that revenues from

156、these countries are denominated in U.S.dollars and become smaller when converted into Colombian pesos.Key assumptions Economic conditions will weaken.After the strong economic recovery in 2021-2022,we expect Colombias economy will expand about 1.4%in 2023 and 1.9%in 2024 due to persistently high int

157、erest rates.Credit growth will remain subdued in 2024.Uncertainty over the governments economic policies could weaken business confidence and limit credit demand from companies and individuals.We expect total loans to grow about 4.5%in nominal terms in 2023 and about 7.0%in 2024,while inflation will

158、 remain above the central banks target in 2024.What to look for over the next year Evolution of banks asset quality and profitability.Cooling economic activity,more stringent lending policies,and still high rates will increase banks credit losses.We will monitor these variables to assess potential i

159、mpacts on asset quality and profitability.Ambitious social reforms.We will monitor the implications of these reforms for the private sector to gauge their impact on the banking system in the coming years.The reforms could influence credit demand,and therefore banks operating performance.Primary Cred

160、it Analyst Alfredo Calvo Mexico City Loan growth Sector-average growth in loans.7.0%2024 forecast 4.5%2023 estimate16.7%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.3%2024 forecast 3.5%2023 estimate 2.5%2022 actual RoAA Sector-average return on average assets.1.2%2024 forec

161、ast 1.0%2023 estimate 1.8%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 22Costa Rica|BICRA group:8 Struggling Profitability Counterbalanced By Asset Quality Improving Toward Historical Levels Key takeaways In our

162、view,a lack of profitability systemwide continues to be one of the main weaknesses of Costa Ricas banking industry.Asset quality is improving as unemployment decreases and inflation gradually recedes.The recovery of Costa Ricas banking segment will continue speeding up as macroeconomic conditions im

163、prove following the countrys improving external and fiscal profile.Key credit drivers Distorted competitive dynamics continue to drag down profitability.The two largest banks are state-owned and hold about 35%market share of loans,which causes market distortions and depresses profitability.For the p

164、ast five years,return on average equity was 3.9%and return on average assets was 0.6%,below other banking systems in the region.Economic imbalances continue to recede as Costa Ricas economy recovers.Banks nonperforming assets(NPAs)have gradually decreased over the past two years,which will keep econ

165、omic imbalances in check.We expect this trend to continue as unemployment falls and inflation gradually recedes.Therefore,we forecast that the systems NPA ratio will average 2.4%and credit losses will be about 1%for the next two years.Key assumptions Persistently high interest rates and the decreasi

166、ng cost of risk will support the systems profitability.Even though interest rates are slowly decreasing in Costa Rica,interest income remains high because loans that were originated with high active rates continue to amortize.Additionally,collection levels remain stable,which limits the cost of risk

167、.For 2024,we forecast a return on average equity of 3.5%and a return on average assets of 0.6%.We expect Costa Ricas financial improvements to gradually result in credit growth.The countrys external debt-net of liquid assets-has declined amid growing exports and accumulation of liquidity.In addition

168、,growth is led by export-oriented goods and service sectors,including export zones with the potential to attract more nearshoring and friendshoring.In our view,this will translate to positive credit growth of 4%-5%in nominal terms for the next two years.What to look for over the next year Costa Rica

169、s fiscal plan execution and access to external funding will support growth in the banking system.In our view,the modification of the fiscal spending rule and implementation of the public employment regime will facilitate the governments planned tapping of global markets under its multiyear borrowing

170、 authority.This should improve the banking systems credit growth momentum in the next two years.Primary Credit Analyst Juan Jaime Romero Mexico City Loan growth Sector-average growth in loans.5.0%2024 forecast 2.0%2023 estimate 3.3%2022 actual NPA ratio Nonperforming assets as a%of system wide loans

171、.2.4%2024 forecast 2.6%2023 estimate 2.8%2022 actual RoAA Sector-average return on average assets.0.6%2024 forecast 0.6%2023 estimate 0.6%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 23El Salvador|BICRA group:9 B

172、anks Exposure To Sovereign Debt Limits The Industrys Liquidity Key takeaways Salvadoran banks have increased their exposure to government risk,and we dont expectthem to reduce it in the next 12 months.This exposure limits their flexibility to fund productive economic sectors.We think the lack of che

173、cks and balances in the country is a risk to the banking industryscompetitive dynamics.Although the sovereign faces economic headwinds to broaden its funding profile,we dont expect a sharp decrease in companies and households payment capacity that would erode domestic banks asset quality in the next

174、 12 months.Key credit drivers Systemwide liquidity constraints due to banks exposure to sovereign debt.We estimate that banks exposure to short-term government bonds is about$1.8 billion.Recently,the Salvadoran government accepted private banks proposal to extend the tenor of part of the governments

175、 short-term debt and swap it to medium-and long-term debt.Nonetheless,this wont reduce the banking industrys exposure to government debt in the next 12 months.El Salvadors weak external position remain a risk for the banking system.If the countrys economy worsens and its external position and rule o

176、f law keep weakening,it could continue straining the governments capacity to access its funding sources.We think this could pose risks for El Salvador to service its medium-and long-term debt with domestic banks.Key assumptions We expect banking industry loan growth to remain subdued.Although we thi

177、nk improving public security could increase internal mobility and tourism inflows,in our view,economic growth and consequently banking credit growth will remain modest.This is given the still low foreign investment,limited productivity,and high emigration of its labor force.High credit risk in the e

178、conomy.We expect banks to maintain manageable delinquency levels and credit losses in the next 12 months.However,we anticipate that high inflation,modest foreign investment,and the countrys inherent economic and social challenges will remain notable risks for the banking system.What to look for over

179、 the next year Weak check and balances will keep pressuring the industrys dynamics.Even though banks in El Salvador have avoided exposure to cryptocurrency on their balance sheets,the banking systems exposure to bitcoin could bring additional controls and higher regulatory transparency.The governmen

180、ts ability to raise money.Even though the government has decreasing financing needs for the next 12 months,it still has pronounced macroeconomic vulnerabilities and limited financing options.Primary Credit Analyst Erick Rubio Mexico City Loan growth Sector-average growth in loans.5.3%2024 forecast 3

181、.7%2023 estimate10.2%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.3%2024 forecast 2.0%2023 estimate 2.3%2022 actual RoAA Sector-average return on average assets.1.4%2024 forecast 1.5%2023 estimate 1.4%2022 actual Figures as of fiscal year ending December.Read latest reportG

182、lobal Banks Country-By-Country Outlook 2024|Forewarned Is F 24Guatemala|BICRA group:7 Despite Economic Stability,Challenging Operating And Market Conditions Could Limit Credit Growth Key takeaways Cautious fiscal and monetary policies have stabilized Guatemalas economy and supported continued GDP gr

183、owth.On the other hand,we think banks face operatingchallenges such as a potential slowdown in remittances and exports,a low-income economy,and a large informal economy that could limit their growth.We forecast that asset quality indicators will deteriorate slightly amid strong consumer loan growth

184、among the largest banks.But we also think theyll remain manageable and consistent with our overall view of the credit risk in the economy.Guatemalas banking system has a historically stable core customer deposit base and access to wholesale funding.However,underdeveloped domestic capital markets lim

185、it funding diversification.Key credit drivers Strong consumer lending growth,along with the complex global economic outlook,will strain Guatemalan banks asset quality in 2024.Nonperforming loans should increase but remain manageable,representing less than 3%of total loans.This is because of strong c

186、onsumer lending over the past 12 months and persistently high inflation that might weigh on companies revenues and households disposable income-and therefore,their payment capacity as well.Guatemalas banking system continues to have a significant amount of foreign currency lending,which poses risks

187、to that system.We estimate that foreign currency loans will stay close to 40%of total domestic loans in the next two to three years.Key assumptions We expect cautious macroeconomic management will prevail-notwithstanding the recent presidential election dispute and unfavorable global economic condit

188、ions.After Guatemalas solid economic recovery,we expect GDP growth of 3.4%,on average,for 2023-2025,which reflects macroeconomic stability despite the outcome of,and the recent legal dispute over,the election.After strong credit growth last year,we expect the pace of growth to slow to 7%-8%,on avera

189、ge,for 2024-2025.The challenging global economic environment and persistently high inflation might contain Guatemalas credit expansion next year.We expect large banks to remain mostly focused on the corporate and commercial segments.What to look for over the next year U.S.economic performance and th

190、e aftermath of Guatemalas 2023 general election.Both will be crucial to Guatemalas economic growth and credit expansion in 2024-2025.Infrastructure projects and public investment.The development of the infrastructure sector remains slow.Public investment and the growth of infrastructure programs wil

191、l be key to boosting the countrys economy and credit growth in the next few years.Primary Credit Analyst Jesus Sotomayor Mexico City Loan growth Sector-average growth in loans.7.0%2024 forecast 9.0%2023 estimate16.2%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.3%2024 foreca

192、st 2.1%2023 estimate 1.8%2022 actual RoAA Sector-average return on average assets.1.7%2024 forecast 1.8%2023 estimate 1.9%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 25Honduras|BICRA group:8 Obstacles To Retail

193、Loan Growth Will Keep Constraining Banks Margins Key takeaways Falling real incomes and rising prices will continue hampering household consumption,limiting banks ability to significantly increase their net interest margins.On the other hand,we expect the recovery of various corporate segments,parti

194、cularly exports and manufacturing,to keep supporting Honduran banks growth.The largest banks stable and diversified retail deposit bases bolster liquidity.Key credit drivers High poverty levels and a large informal economy limit a faster expansion of banks retail business.We believe that weakening i

195、ncomes amid rising prices will continue to act as a drag on household consumption,which,along with high competition in the commercial segment,will limit a consistent increase of banks net interest margins.In addition,the banking systems relatively high administrative expenses weigh on profitability.

196、Honduras relies heavily on its main commercial partner,the U.S.Honduras growth prospects,and consequently the banking systems credit growth,depend in part on GDP growth in the U.S.-the destination for close to 40%of Honduran exports and the main origin of remittances.A slowdown in the U.S.could inhi

197、bit the growth of banks consumer loan portfolios in 2023-2024.Key assumptions The banking system will continue to expand at over 12%.We believe overall lending will grow 12%-14%in the next two years due to the steady performance of diverse commercial sectors in the country.We expect growth mainly in

198、 the corporate segment,while the retail and consumer segments will continue to grow modestly in the next 12-24 months.Asset quality metrics will remain manageable and in line with those of peers in the region.In our opinion,large banks will keep nonperforming assets relatively under control because

199、they mostly lend to large corporations.On the other hand,the weak economy and low GDP per capita could cause banks with narrower diversification and exposure only to consumer loans to have sharper dips in asset quality.What to look for over the next year Still low per capita GDP,high poverty,and lar

200、ge informal sector.Honduras continues to have high poverty levels and its per capita income growth has suffered from many years of low investment and weak competition.We think these factors will keep constraining retail loan growth.The energy sector and government spending.The government-owned elect

201、ricity company,Empresa Nacional de Energa Elctrica(ENEE;not rated),continues to pose a major fiscal weakness.We expect the governments commitment to make ENEEs finances more sustainable will lead it to offer transfers to compensate for ENEEs losses.Focusing on reducing ENEEs losses leaves the govern

202、ment with little room to expand basic services,which require long-term expenditures.Primary Credit Analyst Erick Rubio Mexico City Loan growth Sector-average growth in loans.12.0%2024 forecast 14.2%2023 estimate 22.3%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.5%2024 forec

203、ast 2.4%2023 estimate 2.3%2022 actual RoAA Sector-average return on average assets.1.2%2024 forecast 1.3%2023 estimate 1.3%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 26Jamaica|BICRA group:8 Rebounding Credit Gr

204、owth And Stable Asset Quality Key takeaways Jamaica continues to face high economic risks.However,the risks from the pandemic for the economy and public finances are receding,as reflected by the recent sovereign upgrade.We expect credit growth to average 11%in 2023-2024 as the economy grows.After pe

205、aking in 2021,asset quality has since improved,supporting profitability.Key credit drivers Lower risks in the domestic economy.Jamaicas economy has recovered well following a sharp contraction in 2020,and we expect it will continue to grow,albeit at a slower pace,in the next few years.Banking indust

206、ry benefiting from stable macroeconomic conditions.We expect banks to continue to have healthy performance,as they have over the past two years,with steady credit growth and manageable credit losses.Initiatives for centralized oversight amid mergers and acquisitions.Caribbean conglomerates have been

207、 undertaking mergers and acquisitions,which could introduce spillover risks in times of stress because of increased cross-border business links in the region.In our view,it will be crucial for acquisitions to move in parallel with enhancements of systemic risk management.Key assumptions Economic gro

208、wth returning to pre-pandemic levels.We expect real GDP growth of 2.1%in 2023,spurred by tourism and mining,and growth of 1.6%in 2024,which is in line with pre-pandemic levels.Manageable asset quality.We expect stable asset quality in 2023-2024,supported by the good local economic conditions.Develop

209、ments in the U.S.,given Jamaicas growing loan exposure to overseas residents and Jamaicans high reliance on remittances,will continue to influence asset quality.What to look for over the next year Stronger regulations.We expect regulatory bodies to continue to take steps for a more developed financi

210、al industry,which could attract foreign investors in the next few years.For example,an improved and centralized oversight framework would help mitigate the increasingly interconnected risks across the island and the Caribbean.Unregulated players introducing market distortions.We think the increasing

211、 presence of unregulated credit unions,which generate stiff competition through lower lending interest rates,weighs on the systems stability.However,regulators have started an initiative to formally supervise these entities,which should help lessen market distortions if the initiative takes effect.P

212、rimary Credit Analyst Ivana Recalde Buenos Aires Loan growth Sector-average growth in loans.12.0%2024 forecast 10.0%2023 estimate 12.9%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.4%2024 forecast 2.5%2023 estimate 2.5%2022 actual RoAA Sector-average return on average assets

213、.2.7%2024 forecast 2.7%2023 estimate 2.8%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 27Mexico|BICRA group:5 Economic Resilience Will Continue Promoting Credit Growth,Although At A Moderate Pace Key takeaways We

214、expect Mexicos economic activity to weaken in 2024.Along with high interest rates,we think this will limit credit demand.Weakening economic conditions and persistently high rates will pressure bank asset quality and profitability,although they will remain healthy.Banks will keep operating with solid

215、 capitalization and sound liquidity.Key credit drivers Bank nonperforming assets(NPAs)to increase but remain manageable and fully covered by reserves.A slowing economy and high rates are pressuring households and companies debt payment capacity.However,banks long-standing conservative lending practi

216、ces will cushion the impact.Higher provisions for credit losses will pressure profitability.However,sound margins,cost containment efforts,and conservative underwriting policies will allow Mexican bank profitability to remain healthy.We expect returns on assets to hover around 1.7%-1.8%while returns

217、 on equity will be about 17%in 2023-2024.Key assumptions Challenges despite better-than-expected economic growth in 2023.We expect Mexicos real GDP to decelerate in 2024 to 1.7%,and thereafter we see growth increasing to about 2.0%in 2025.In our view,the key to strengthening growth is more robust in

218、vestment.The main obstacles for growth are rule of law,public insecurity,quality of education,and the scarcity of energy and water.Credit demand moderating given the slowing economy and weakening consumer and business confidence.Still high inflation has eroded household purchasing power and corporat

219、e profits while high rates are discouraging credit demand.As long as the local debt market remains calm,banks can support the financing needs of large and midsize companies with adequate credit quality.On the other hand,loans to individuals will be concentrated in credit cards,payroll loans,and mort

220、gages.What to look for over the next year Nearshoring could increase credit demand.Well follow how key obstacles-including security-related concerns and inadequate supply of water and energy-will be addressed.The 2024 national elections.We assume the current administration will remain cautious in ex

221、ecuting economic policies.However,we dont expect policy actions will substantially strengthen Mexicos business environment.Primary Credit Analyst Alfredo Calvo Mexico City Loan growth Sector-average growth in loans.8.0%2024 forecast 8.0%2023 estimate 12.5%2022 actual NPA ratio Nonperforming assets a

222、s a%of system wide loans.2.4%2024 forecast 2.5%2023 estimate 2.3%2022 actual RoAA Sector-average return on average assets.1.7%2024 forecast 1.8%2023 estimate 2.0%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 28Pan

223、ama|BICRA group:5 Still Weakening Asset Quality And Modest Credit Growth In 2024 Key takeaways We expect weaker asset quality metrics in 2023 and 2024,with a gradual recoveryafterward,as loan forbearance measures related to the pandemic ended in 2022.Profitability is recovering gradually,but the pot

224、ential increase of loan-loss provisions could hamper banks bottom-line results for the next 12 months.Although Panama doesnt have a lender of last resort,the government has successfully used Banco Nacional de Panama as the vehicle to provide liquidity to the banking system.Key credit drivers Weakeni

225、ng asset quality in the next 12 months.Despite manageable asset quality as support programs were phased out at the end 2022,we still consider that latent risks could dent borrowers payment capacity and banks asset quality.The high number of loans reported as Stage 3 support our belief that nonperfor

226、ming assets(NPAs)could still rise and pressure the banking system this year.We forecast that NPAs will peak at about 3.4%with credit losses close to 1.0%,which will decrease gradually as the economy recovers.However,we expect these metrics to return to pre-pandemic levels after 2024.Lack of a lender

227、 of last resort.Panama doesnt have a central bank,a formal lender of last resort,or an effective deposit insurance system to support distressed financial institutions.However,the government has used the public-owned bank,Banco Nacional de Panama,as the vehicle to provide liquidity to the financial s

228、ector,corporations,and small and midsize enterprises.Key assumptions Macroeconomic policies and diversified economy bolster growth prospects.Panamas GDP growth outperformed expectations during the last two years amid solid external performance and robust domestic recovery as mobility restrictions we

229、re lifted.Economy remained robust in 2023,reflecting resilience in consumption and continued recovery in construction and tourism.We expect GDP growth to average 6.5%in 2023.We forecast Panamas economy to grow 5%in 2024,given sound macroeconomic policies,high private-and public-sector investments,an

230、d a diversified economic base.Therefore,we expect credit growth to average 4.5%for the next two years.What to look for over the next year Profitability will continue improving gradually but risks of higher loss provisions to remain.Although profitability is recovering,higher loa-loss provisions coul

231、d hamper the systems bottom-line results.During 2024,we expect systemwide returns will represent about 1.4%of adjusted assets,slightly higher than in 2023,but still below the 1.5%average prior to the pandemic.Efforts to strengthen the regulatory framework.The financial system regulation continues to

232、 improve,reducing the gap with international regulations,although implementation challenges remain.In addition,the EU added Panama to its blacklist of uncooperative jurisdictions in terms of tax transparency and financial information,although the decision hasnt yet damaged the financial system,in ou

233、r view.Primary Credit Analyst Ricardo Grisi Rodriguez Mexico City Loan growth Sector-average growth in loans.4.0%2024 forecast 5.0%2023 estimate11.0%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.0%2024 forecast 3.4%2023 estimate 2.8%2022 actual RoAA Sector-average return on

234、average assets.1.4%2024 forecast 1.3%2023 estimate 1.3%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 29Paraguay|BICRA group:8 Profits On The Rise Because Of Widening Margins,Offsetting Potentially Higher Losses Ke

235、y takeaways Benign weather should boost the countrys agricultural output.We estimate Paraguays GDP will grow 5%in 2023 before returning to its trend growth rate of about 3%in 2024.The banking system remains highly exposed to cyclical sectors and dollarization.Regulations have been improving,but they

236、re still aligning to international standards.Nonperforming assets(NPAs)have been slightly increasing as previously deferred loans mature,but profitability continues to recover as margins increase.Key credit drivers Asset quality metrics remain manageable but have benefited from deferral measures.The

237、 severe drought that hit Paraguays agribusiness sector in late 2021 had limited effect on NPAs.However,nonperforming loans(NPLs)have somewhat worsened in 2023,and they could further deteriorate as the still sizeable stock of restructured loans amortizes.Still,we think that NPAs will stabilize in 202

238、4.Profits should keep improving in 2023 and 2024 as wider margins offset potentially higher losses.The banking systems net interest margins should keep improving,which would boost the return on average equity to above 15%for the first time since the beginning of the pandemic.Dollarization remains hi

239、gh,and the banking system is still exposed to cyclical sectors.Foreign currency lending in Paraguays banking system was 46%of total loans in December 2022,in line with the five-year average of 45%.Moreover,cyclical sectors like agriculture and cattle continued to account for over 30%of total loans.K

240、ey assumptions We expect Paraguays GDP growth to slow to 3%in 2024,after a strong export rebound in 2023.We expect economic diversification to continue over the next three years and gradually reduce the volatility of economic performance,helped by a large pulp mill project(Paracel)that is likely to

241、materialize in 2024-2025.What to look for over the next year Economic activity.Well continue to monitor Paraguays economy,especially after the shocks in recent years that have weakened agents payment capacity.Even though the economy has grown more diverse over the last decade,growth is still vulnera

242、ble to weather-related risks and commodity prices,because the soy and hydroelectric industries contribute about 7%of GDP.Following the pandemic,and the recent severe drought,unemployment and informality remain slightly above pre-pandemic levels.Inflation and interest rates will also be key factors t

243、o monitor.Asset quality.The evolution of the significant stock of restructured loans,coupled with its cyclicality,could potentially increase credit losses in the coming years,which could hurt the financial systems profitability and capitalization and limit credit growth.Primary Credit Analyst Henriq

244、ue Sznirer So Paulo Loan growth Sector-average growth in loans.10.0%2024 forecast 10.0%2023 estimate 12.9%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.4.5%2024 forecast 4.5%2023 estimate 4.2%2022 actual RoAA Sector-average return on average assets.1.9%2024 forecast 1.8%2023 e

245、stimate 1.6%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 30Peru|BICRA group:5 Banking System Influenced By Sovereign And Climate Events Key takeaways The evolution of sovereign fundamentals-including economic gro

246、wth over the short to medium term-and external events are relevant factors for the industry.We expect asset quality metrics to remain pressured due to the maturity of refinanced loans granted due to social disturbances this year,the deterioration of conditions in the retail segment,and the effects o

247、f the El Nino climate pattern.Although profitability has been hit by higher provisioning needs,we expect it to remain satisfactory given still high loan rates and margins and a decreasing share of government-guaranteed loans.Key credit drivers Ratings on financial entities are influenced by that on

248、the sovereign.The sovereigns deteriorating credit fundamentals led us to revise the outlook on it to negative last year.We expect asset quality metrics to remain pressured,but losses should be manageable given good provisioning levels and healthy profitability.Asset quality metrics will continue to

249、be affected by maturing reprogrammed loans that were granted during social disturbances,the impact of weaker economic growth,and still weak disposable income for consumers.Climate events,especially El Nino in 2023 and potentially first-quarter 2024,will also affect metrics.Key assumptions We expect

250、lending to remain moderate in 2023 and 2024.This is due to the final amortization of government programs granted during the pandemic and economic agents continued cautious approach to new investments(affecting credit demand).Profitability should remain satisfactory despite higher provision needs.Mar

251、gins remain resilient given banks ability to pass through higher rates to ultimate borrowers and the change in the loan portfolio mix,with fewer government program loans and more retail lending.Banks will implement the Basel III framework through 2026.We expect banks to adhere to related increases i

252、n capital requirements.What to look for over the next year Dissipation of political issues and economic recovery will determine the path of the financial industry.Although receding,governability risks are still present,given the fragmentation in Congress and the historical tensions between the execu

253、tive and legislative branches.We will continue monitoring the impact of political volatility and external factors on Perus economic prospects and on its financial industry in the short to medium term.Primary Credit Analyst Ivana Recalde Buenos Aires Loan growth Sector-average growth in loans.6.0%202

254、4 forecast 2.0%2023 estimate3.4%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.7%2024 forecast 4.0%2023 estimate 3.4%2022 actual RoAA Sector-average return on average assets.1.8%2024 forecast 2.0%2023 estimate 1.9%2022 actual Figures as of fiscal year ending December.Read lat

255、est reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 31Trinidad and Tobago|BICRA group:6 High Oil Prices Spur Economic Recovery Key takeaways Trinidad and Tobago(T&T)s economy will benefit from fairly strong oil prices through the end of 2023 and into 2024.However,global energy pri

256、ces will continue to cause T&Ts economy to fluctuate in the next few years.T&Ts economic contraction in 2019-2021 continues to pressure banks asset quality.However,we forecast profits to continue recovering in 2024 as credit growth resumes,net interest margins recover,and provision requirements decr

257、ease amid lower credit risks.Banks entered the economic crisis-caused by COVID-19 and the weak energy sector-with solid loss reserves,capital,and liquidity,which have helped them absorb the economic shocks.Key credit drivers Energy dependency.Although banks arent heavily exposed to the energy sector

258、(about 4%of total loans),T&Ts economy heavily depends on oil,gas,and petrochemicals,which have historically accounted for over a quarter of the governments revenue and real GDP and for nearly 80%of exports.Banks are well prepared to withstand stress scenarios.The impact of the pandemic and the domes

259、tic energy sector downturn in recent years caused GDP to contract nearly 10%in 2019-2021.Although the economy has been recovering since 2022,unemployment remains high and pressures debt capacity.However,we think the situation is manageable thanks to banks conservative provisioning policies and good

260、capital and liquidity.Key assumptions Economic growth.We estimate real GDP to grow about 2.5%this year and 1.7%in 2024,but the unemployment rate will remain 6.5%,above the 4.0%before the pandemic.Manageable credit losses.Banks have been able to contain the damage to asset quality stemming from the r

261、ecession in past years.However,still high unemployment could squeeze asset quality more than we expect.What to look for over the next year Stable administration.We expect that T&Ts parliamentary democracy and social cohesion will anchor its political stability and predictability.Still high unemploym

262、ent.In our view,unemployment is a key indicator for deeper credit stress in the financial system.Household debt service has risen consistently in the past few years and could be a source of vulnerability if the labor market remains soft for a prolonged period.Exchange rate.The countrys heavily manag

263、ed exchange rate has resulted in U.S.dollar shortages in the last few years that have constrained economic activity,weakening local businesses ability to pay suppliers and obtain key imports.The banking system maintains a long position in dollars.Primary Credit Analyst Camilo Prez Mexico City Loan g

264、rowth Sector-average growth in loans.6.0%2024 forecast 7.0%2023 estimate 8.6%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.3.1%2024 forecast 3.2%2023 estimate 3.2%2022 actual RoAA Sector-average return on average assets.2.8%2024 forecast 2.7%2023 estimate 2.6%2022 actual Figur

265、es as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 32Uruguay|BICRA group:5 Stable Performance Despite Slowing Economic Growth Key takeaways GDP growth will slow in 2023,from an average of 5.1%for 2021-2022,and we expect it toaverage 2.

266、5%thereafter.Well-established institutions will continue to anchor economic stability.Banks will continue to perform well,with manageable asset quality metrics,high liquidity,stable deposit bases,and adequate solvency.Banks profitability will improve due to increased returns in investment portfolios

267、 given higher interest rates and stable cost of risk,which will counterbalance the effect of lowforeign exchange rate movements on their highly dollarized balance sheets.Key credit drivers Asset quality metrics will remain manageable in the next 12-18 months due to banks conservative credit growth s

268、trategies.Nonperforming loans(NPLs)will slightly worsen,but should remain below historical levels because we dont expect new large NPLs or a significant worsening of the retail portfolio.For the next few quarters,we expect banks profitability to grow.Increased interest income from investment portfol

269、ios and liquid funds given still high local and international interest rates,along with stable cost of risk,will continue supporting profitability.This should counterbalance the low exchange rate movements(considering most banks active long position in dollars)and higher interest expenses.Key assump

270、tions We expect 1.0%real GDP growth in 2023 and an average of 2.5%thereafter.In the next few years,higher consumption as real wages recover and smaller and diversified investment projects in various sectors will sustain GDP growth.Slow real credit growth.The private sectors access to credit remains

271、low,at about 28%of GDP in 2022,and we expect it will stay near 29%in the next 12-24 months.We forecast 10%-12%nominal credit growth in the next two years,driven by soft recovery in credit demand as investment projects materialize and the economy recovers from the drought,and due to the 4%-5%Uruguaya

272、n peso depreciation.However,high interest rates due to contractionary policies promoted by Uruguays central bank to tackle inflation will continue dampening credit demand,despite recent rate cuts.The banking system is mainly funded with stable deposits.As of June 2023,the deposit base was steady,wit

273、h nonresident deposits accounting for 8%of total deposits.We expect the deposit base to remain stable in the next 18 months.What to look for over the next year Limited monetary flexibility.High inflation and still elevated dollarization continue to limit Uruguays monetary policy flexibility.Over hal

274、f of resident loans and more than 70%of resident deposits are in dollars.Primary Credit Analyst Sofia Ballester Buenos Aires Loan growth Sector-average growth in loans.12.0%2024 forecast 10.0%2023 estimate8.9%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.0%2024 forecast 2.0%

275、2023 estimate 1.5%2022 actual RoAA Sector-average return on average assets.2.3%2024 forecast 2.2%2023 estimate 1.1%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 33Europe Global Banks Country-By-Country Outlook 202

276、4|Forewarned Is F 34Austria|BICRA group:2 Well Buffered Amid Persistent Structural Issues Key takeaways Austrian banks are among the largest beneficiaries of rising interest rates,reflecting their relatively high share of variable interest rate lending,which enabled quick repricing.While a material

277、deterioration of asset quality metrics is not our base case,downside risk exists amid uncertainties in the economic forecast and customers debt repayment capacity.Key credit drivers In our view,the benefits from higher interest rates have peaked.However,they continue to provide banks earnings buffer

278、s to sufficiently mitigate the ongoing increase in operational risk and refinancing costs.While pockets of risk threaten the credit quality of weaker or indebted borrowers,downside is limited for Austria,reflecting the relatively low share of higher risk loans.Capitalization remains robust.Increased

279、 profitability strengthened the systemwide regulatory Tier 1 capital ratio to 17.3%at end-2022,a level that we expect to persist.Key assumptions Economic growth is slowing significantly.We anticipate only marginal real GDP growth of 0.3%in 2023,1.6%in 2024,and 1.5%in 2025.While inflation-projected t

280、o be 7.4%in 2023,4.3%in 2024,and 2.9%in 2025-and rising interest rates pose a risk to growth,we think that the impact on banks asset quality will be limited.This is because they are buttressed by Austrias high wealth levels,low household indebtedness,and a low unemployment rate,which we expect to re

281、main at or below 5%.Sound core profitability.We expect the Austrian banking sectors return on average assets(RoAA)to converge to about 0.8%in the medium term.In our view,efficiency will oscillate around 65%,which is not outstanding in the international context,but is sufficient to support banks prof

282、itability through the cycle.At end-2022,the banking system reported 0.9%RoAA and a 59%cost-to-income ratio.A dense branch network,legacy IT systems,and complex institutional structures continue to hinder material sustainable improvements in efficiency and profitability.What to look for over the next

283、 year Macroeconomic developments.Worsening economic conditions or secondary effects from the geopolitical hotspots,particularly on global energy prices and trade flows,could challenge banks in Austria.House price development.Our base case is that house prices are likely to continue to decrease in re

284、al terms in 2023 and 2024 in Austria,in line with our expectations for Europe.However,we foresee only a gradual correction,both in nominal and real terms.We expect that the decline in house prices,despite being accompanied by a significant increase in interest rates and higher cost of living,will no

285、t materially affect the credit quality of Austrian banks mortgage portfolios.Primary Credit Analyst Anna Lozmann Frankfurt Loan growth Sector-average growth in loans.1.8%2024 forecast 0.8%2023 estimate5.0%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.0%2024 forecast 1.9%2023

286、 estimate 1.7%2022 actual RoAA Sector-average return on average assets.0.8%2024 forecast 0.8%2023 estimate 0.9%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 35Belgium|BICRA group:2 Banks Can Manage A Rise In Nonpe

287、rforming Assets Key takeaways Economic slowdown persists,with expected GDP growth of 1%in 2023,down from 3.3%in 2022.However,Belgiums medium-term economic prospects remain resilient.Banks will likely see nonperforming assets(NPAs)increase in 2024 from the current historical lows,but these should rem

288、ain manageable.Belgian banks healthy capital levels and digitally advanced,bank-insurance businessmodels will continue to help them navigate the economic slowdown.Key credit drivers Slowing credit growth in 2023.The rise in private sector borrowing has outpaced GDP growth in recent years(except 2021

289、)as households have taken advantage of low interest rates.Rising rates slowed the annual growth of credit to the domestic private sector in the second half of 2022,with this trend accelerating in 2023.We expect credit growth to stabilize at about 4%per year,below the above 5%recorded during 2016-202

290、2.Healthy capital and bank-insurance business models will help Belgian banks weather the economic slowdown.Pressure on the private sector will persist in 2023 and 2024,likely pushing up NPAs and increasing cost of risk from below the 10 basis points reported in June 2023 at the system level.We expec

291、t banks to continue to focus on cost-efficiency,as high inflation and ongoing investment in digitalization have driven up their operating costs over the past months.Increasing net interest income-although at a slowing pace as deposit betas increase-as well as revenues from insurance and asset manage

292、ment activities,will continue to counterbalance higher costs,supporting banks profitability.Key assumptions Belgium will experience slower growth in 2023,with the economy recovering in 2024.We anticipate that a pick-up in business sentiment will bolster domestic economic recovery next year.We expect

293、 GDP growth of 1.2%in 2024 and 1.8%in 2025.The labor market is expected to hold-up,with a stable unemployment rate of 5.6%.Short-lived correction in residential prices in 2023 and 2024.We anticipate a house price correction in real terms in 2023 and 2024,followed by a mild recovery in 2025.What to l

294、ook for over the next year Interest rate pass-through into deposit rates.If competition for deposits or public pressure for higher deposit rates intensifies,this would substantially limit the extent to which banks can take advantage of rising interest rates.Adaptability to increasing interest rates

295、and efficiency improvements.While higher interest rates will benefit banks net interest income,this will likely trail cost increases due to inflation.As a result,disciplined management of asset margins will be important as liability costs rise,while efficiency improvements will be key to banks abili

296、ty to maintain profits.Primary Credit Analyst Letizia Conversano Paris Loan growth Sector-average growth in loans.4.0%2024 forecast 4.0%2023 estimate5.9%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.2.2%2024 forecast 2.0%2023 estimate 2.0%2022 actual RoAA Sector-average return

297、 on average assets.0.8%2024 forecast 0.7%2023 estimate 0.7%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 36Cyprus|BICRA group:8 Asset Quality Will Remain Weak,But Earnings Improve Key takeaways Despite significant

298、 progress,banks stocks of nonperforming exposures(NPEs)remain among the highest in Europe,and we anticipate this will continue in 2024-2025 amid the weak operating environment.Cyprus links to Russia could threaten its economy and the banking sector.Banks will maintain their rebalanced funding profil

299、es,but the still-high share of nonresident deposits creates funding volatility risks.Key credit drivers Cypriot banks stock of NPEs will stay high.At 9.5%of gross loans as of end-2022,or about half excluding NPEs under Hellenic Banks asset protection scheme,Cypriot banks NPEs remain among the highes

300、t in Europe.We expect the sale of legacy problem assets will slow in 2024,and ongoing monetary tightening and slowing economic growth should lead to greater NPE inflows.However,this should be manageable as credit standards are stricter and bank provisions have strengthened.Profitability prospects,al

301、though improving,remain weaker than European peers.Rising interest rates have bolstered net interest income,with banks return on equity peaking at above 13%at end-June from 4.7%in 2022.We expect return on equity will fall to about 10%in 2025,as the cost of funding will adjust.Banks ability to reduce

302、 operating costs,while investing in digital transformation,will be key to offsetting inflationary pressure and still-high credit provisions.Banks funding risks are easing,but nonresident deposits remain a source of volatility.Banks funding comes almost entirely from customer deposits,and reliance on

303、 nonresident deposits is high(about 16%of the total,of which less than 5%is from Russia).We expect Cypriot banks access to wholesale funding will remain modest and expensive.Key assumptions Cyprus economic growth should outpace the EU average.Despite material exposure to Russia and the winding-down

304、of the Cyprus Investment Program(the citizenship-by-investment scheme),growth should settle at just below 3%over 2023-2026.Credit losses will remain elevated,hampering banks profitability.We forecast credit losses will remain at about 95 basis points in 2023-2024,owing to persistently high inflation

305、,higher interest rates,and the worsening operating environment.What to look for over the next year The governments mortgage-to-rent scheme could address some household NPEs.Even if part of targeted NPEs are already outside the banking sector,this could cushion some deterioration.Access to funding ma

306、rkets and pricing trends.Even if modestly,the two largest banks will need to tap the markets to fill their minimum requirement for own funds and eligible liabilities buckets by 2025,while nonresident deposits will continue to gradually decline.The ability to contain the cost of funding will be impor

307、tant in sustaining profitability.Primary Credit Analyst Regina Argenio Milan Loan growth Sector-average growth in loans.2.5%2024 forecast -1.0%2023 estimate -6.9%2022 actual NPA ratio Nonperforming assets as a%of system wide loans.9.7%2024 forecast 9.1%2023 estimate 9.5%2022 actual RoAA Sector-avera

308、ge return on average assets.0.8%2024 forecast 0.8%2023 estimate 0.3%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 37Czech Republic|BICRA group:3 The Banking Sector Remains Resilient Despite A Shallow Recession Key

309、 takeaways Czech banks profitability remains among the best in Europe thanks to high interest margins,sound cost efficiency,and surprisingly low credit losses.We expect nonperforming assets and credit losses to remain broadly flat over the next 12 months in our base-case scenario.A downside scenario

310、 would entail an entrenched recession,with rising defaults and credit costs that can weaken banks financial performance and capitalization.Key credit drivers Risk of an entrenched recession persists.Economic conditions in the Czech Republic could deteriorate further,given global growth uncertainty a

311、nd the stagnation in Europe,particularly Germany.In our base-case scenario,we expect a mild impact on the banking sectors performance,but we foresee a hit to asset quality and profits in our downside scenario of an entrenched recession.Banks have sound earnings,capital,and liquidity buffers.Even in

312、our downside scenario,with the nonperforming asset ratio rising to 4%and credit losses peaking at 100 basis points in the next 12 months,banks earnings and capital buffers can comfortably absorb the effects,in our view.The high share of liquid reserves is supportive,and we expect deposit portfolios

313、to remain strong and stable.Key assumptions We expect stagnation for 2023.We think GDP growth will slow to 0.2%in 2023 in our base-case scenario as private consumption cools amid falling real wages.For 2024,we anticipate a rebound to 2.0%as domestic demand returns,supported by disinflation,real wage

314、 growth,and a very tight labor market.We expect Czech banks to benefit from these conditions after 2023.The banking sector remains highly profitable.Czech banks have benefited from the sharp rise of policy rates,although higher funding costs had a visible negative impact on profits.Operating expense

315、 has also gone up because of inflation.The windfall taxes introduced in 2022 will likely have no financial impact in 2023 for most banks.Despite stronger deposit repricing,Czech banks remain among the most profitable and cost-efficient banks in Europe.What to look for over the next year Implications

316、 of the Russia-Ukraine war.We expect the Czech economy to weather the economic fallout from the war in Ukraine with limited impact on the banking sector.Conversely,further deterioration of consumer sentiment and reduced business activity could lead to weaker bank performance,particularly through low

317、er demand for loans and higher credit losses.Potential correction of real estate prices.Residential real estate prices have risen significantly.While unlikely,a further increase of mortgage refinancing rates and higher unemployment could trigger a substantial correction in the housing market.In the

318、downside scenario,we estimate up to 20%-30%nominal decrease in house prices.Nationwide,house prices have mildly corrected,by about 4%nominally since third-quarter 2022.Primary Credit Analyst Cihan Duran Frankfurt Loan growth Sector-average growth in loans.7.0%2024 forecast 6.5%2023 estimate 5.7%2022

319、 actual NPA ratio Nonperforming assets as a%of system wide loans.2.2%2024 forecast 2.2%2023 estimate 2.2%2022 actual RoAA Sector-average return on average assets.1.0%2024 forecast 0.9%2023 estimate 1.1%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Co

320、untry Outlook 2024|Forewarned Is F 38Denmark|BICRA group:3 Robust Economy And Sound Asset Quality Support Profits Key takeaways Higher interest rates boosted Danish banks profitability but it still lags that of many Nordic peers due to limited growth prospects,cost inflation,and high competition.Den

321、marks wealth and the governments track record of fiscal support should help banks absorb moderately increasing credit losses resulting from subdued economic prospects in 2023-2024.Banks rely substantially on wholesale funding,but market depth and a stable domesticcovered bond market operating under

322、Denmarks Balance Principle bolster stability.Key credit drivers Credit losses are relatively low in a European context.We anticipate that the difficult operating environment since the start of the Russia-Ukraine war,as well as inflation and global economic slowdown,will likely increase credit losses

323、.These should stay manageable,however.Robust capitalization offsets banks lagging profitability.Limited loan growth,intense competition,and investments in compliance and digitalization continue to weigh on Danish banks earnings.At the same time,rising interest rates and cost-efficient stable funding

324、 through covered bonds generally support banks profitability and should facilitate capital buildup from improving earnings retention and funding of moderate shareholder dividends.Key assumptions The pharmaceutical sector should spur economic growth.We forecast real GDP growth in Denmark of 1.1%in 20

325、23 and 1.2%in 2024 as pharma offsets weaker performance in other sectors.This is down from 2.7%in 2022 and reflects the effects of the Russia-Ukraine war,global supply-chain bottlenecks,and weaker consumer sentiment.House prices slowly stabilize.We forecast that the mortgage sector will slowly botto

326、m out,with a 0.7%growth forecast in annual real house prices in 2024,after about an annual 9.0%decrease in the difficult 2022 and 2023 markets.This is because we expect supply and demand fundamentals to gradually normalize under pressure from inflation,difficult markets,and increased mortgage intere

327、st rates.What to look for over the next year Asset quality trends.We forecast Denmarks resilient economy and high employment will contain nonperforming loans at 1.6%of domestic loans by 2024,mildly up from 1.5%in 2022,and translate into moderate credit losses at a manageable 0.1%by 2024.This is unde

328、rpinned by banks balance sheet strengthening in recent years,and tailwinds from the robust economy and the pharmaceutical sector in particular.Development in house prices and private sector indebtedness.Stabilization of property prices is paramount to asset quality,considering that Danish private se

329、ctor debt is among the highest in the EU.Primary Credit Analyst Harm Semder Frankfurt Loan growth Sector-average growth in loans.2.0%2024 forecast 1.0%2023 estimate-4.1%2022 actualNPA ratio Nonperforming assets as a%of system wide loans.1.6%2024 forecast 1.5%2023 estimate 1.5%2022 actual RoAA Sector

330、-average return on average assets.0.4%2024 forecast 0.4%2023 estimate 0.2%2022 actual Figures as of fiscal year ending December.Read latest reportGlobal Banks Country-By-Country Outlook 2024|Forewarned Is F 39Finland|BICRA group:2 Banks Will Generate Record Earnings Despite Stagnating Economy Key ta

331、keaways The Finnish banking sector benefits from higher interest rates owing to banks floating-rate loan books,and we anticipate materially improved profitability in 2023-2024.The weak economic outlook and low private-sector confidence will limit credit demand.We expect banks asset quality to remain

332、 intact due to sound labor market conditions,a strong social safety net,and prudent underwriting standards.Key credit drivers Higher interest rates will boost profitability.Finnish banks loan books are tied to EURIBOR,and ongoing loan repricing will fuel operating income.The interest rate pass-throu

333、gh remains limited and we expect the deposit margin to adjust with a lag.We project net interest income and overall profitability will stay solid through 2024.We believe credit growth will remain muted.Household debt decreased to 126.6%of disposable income in June 2023,and we expect this to continue as demand for credit remains modest.Overall debt remains lower than that of Nordic peers and the la