Market intelligence firm S&P Global predicts that banks will face nearly $1 trillion in credit losses this year, despite an improving macroeconomic backdrop.
According to the firm’s Global Credit Outlook 2025 report, global credit conditions are expected to remain supportive in 2025 as major economies successfully engineer soft landings and central banks adopt looser monetary policies.
While S&P Global states that about eight out of 10 banking groups under its watch have stable ratings outlooks, it anticipates that banks worldwide will experience more losses from delinquent and bad debt this year.
“We forecast that global credit losses will increase by approximately 7%, reaching $850 billion in 2025 – a figure that aligns with our base case at current rating levels for most banks.”
The market insights firm suggests that this figure could be higher if global credit conditions are negatively impacted by one or more potential headwinds this year.
“In summary, any improvement in global credit conditions will be a narrow path with overlapping risks. Slowing economic activity, the possibility of resurgent inflation, and political polarization could lead to sustained periods of market volatility.”
S&P Global also highlights the prevailing uncertainty in the US, stating that global credit conditions could deteriorate due to potential changes in key policies such as higher tariffs. The firm notes that the proposed economic plans of President-elect Donald Trump could trigger a resurgence of inflation, causing the Federal Reserve to abandon its rate-cutting cycle and posing a threat to credit quality.
“As the US economy settles into a soft landing, credit conditions for borrowers in North America are expected to remain fairly favorable. However, during the US political transition, the prospect of significantly higher tariffs reigniting inflation and forcing the Federal Reserve to halt – or even reverse – its cycle of monetary policy easing poses a significant risk.”
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