New Delhi
80% of global banks will maintain stable ratings in 2025, driven by easing inflation and relief for borrowers, particularly in stressed sectors like commercial real estate, according to a report on Thursday. However, the report cautioned that macroeconomic improvements may not be enough to boost the credit standings of most banks.
Credit analyst Gavin Gunning noted that as interest rates begin to fall in many banking regions, banks will likely see some relief, though the effects will take time and vary by region. The report predicts that credit costs, which reflect provisioning for potential loan losses, will continue to rise due to the stresses of the past few years, particularly the sharp increases in interest rates.
S&P estimates global credit losses will increase by 7%, reaching around $850 billion in 2025. This uptick is expected given the higher credit losses already embedded in most banks’ current ratings.
Despite the overall stable outlook, the report identified several risks that could negatively affect bank ratings. These include a potential global economic slowdown, worsening property sector conditions, high interest rates combined with high levels of government and corporate debt, and emerging risks from technologies like AI, climate change, and cyber threats.
Gunning also emphasized that the decline in interest rates may be slower and more varied than previously forecasted, with recent political events, such as the US elections, possibly affecting inflation risks.
