Food for thought17 Nov 2020 17:12
Can 2021 Be Even Worse For Banks? (1126 Gmt)
The 25%+ surge in European banking shares this November says a lot about the optimism burst triggered by the Pfizer/Moderna vaccines announcements.
But looking forward into the global banking sector in 2021, S&P, which considers longer term debt ratings rather than short term prospects for stocks, takes a sobering view.
"This year has been hard for banks but next year may be even tougher", the rating agency believes, noting stress might build up across banking loans when governments eventually phase out their help.
"The expected progressive withdrawal of such support in 2021 will reveal a truer picture of underlying bank asset quality, even as economies start to recover".
In that light, "short-term supports to banks and borrowers may leave longer-term overhangs", it adds, while other risks such as a weakening in property prices could also bite.
Not to mention a worse than expected economic slump caused by the pandemic and a rise in leverage and insolvencies.