Global banks will keep on a stable ratings course in 2025. Easing inflation will help borrowers and reduce stresses on harder-hit sectors including commercial real estate. However, we do not envision macro tailwinds will be sufficient to strengthen the credit standing of banks.

“With the interest rate cycle already turning in numerous banking jurisdictions, some relief is finally within sight for bank borrowers,” said S&P Global Ratings credit analyst Gavin Gunning. “Banks’ asset quality will eventually benefit although the transmission effect will take time and will vary across geographies.”

That’s according to reports we published today:

• Our overarching view and one-page summaries for 86 banking jurisdictions, titled, “Global Banks Country-By-Country Outlook 2025: Cautiously Confident.”
• A slide deck presenting key messages and summarizing our outlooks, titled, “Global Banks Outlook 2025: Cautiously Confident.”

About 80% of banking groups globally have stable rating outlooks and we envisage this trend continuing in 2025. Positive ratings movements will more likely be driven by idiosyncratic country and bank bank-specific factors.

Credit costs (a gauge of provisioning) will likely keep rising as a percentage of gross loans. This reflects stresses over the past few years, including via a steep and fast increase in policy rates. We forecast global credit losses will increase by about 7% to US$850bn in 2025. Higher credit losses are within our base case at current rating levels for most banks.

“Banks have, overall, satisfactorily contended with stressful operating conditions and events over the past five years,” said S&P Global Ratings credit analyst Emmanuel Volland.. “This gives us confidence that rating resilience is more likely should a downside scenario emerge.”

We identify four key downside risks to bank ratings as:

• A global economic slowdown outside our base case;
• A worse-than-expected property sector deterioration;
• Still-high interest rates superimposed upon high government and corporate sector leverage;
• Emerging risks including new technologies (such as AI), climate change and cyber that could widen credit differentiation, given that adaption to such changes could prove positive or negative.

“The trajectory of the interest rate descent may be weaker than our current economic forecasts indicate,” added Mr. Gunning. “Previous rises in interest rates were sharp and largely in unison as central banks fought rising inflation; in contrast, the trajectory of their descent will be slower and more variable across jurisdictions. Moreover, the recent US election results could tilt inflation risks upward.”

Other issues covered in the report include strengthening regulatory settings, and rising bank exposure to private capital markets. The report includes one-page summaries of outlooks for rated banking jurisdiction across the globe.

INTERACTIVE DASHBOARD AND VIDEO

An interactive dashboard with key data from our reports is available here: https://www.spglobal.com/ratings/en/research-insights/sector-intelligence/interactives/global-banks-outlook-2025

We discuss highlights from our reports in this video: https://www.spglobal.com/ratings/en/research-insights/videos/20241114-Global-Banks-Outlook-2025

LIVE WEBINAR AND Q&A

Join S&P Global Ratings’ Global Financial Institutions analysts for two live, interactive cross-regional webinars on Wednesday, Nov. 20. Our subject matter specialists will explore the key themes and trends for 2025, answer audience questions, and gather audience views through live polls.

Asia-Pacific session, 2:00PM SGT; registration link:

https://event.on24.com/wcc/r/4775866/90B2C53BC8B27B441A03CD57FDDE44A2?partnerref=MR

Americas and EMEA session: 2:00PM GMT; registration link:

https://event.on24.com/wcc/r/4775867/0B78F5BF26029B177DAD4F522C943810?partnerref=MR

This report does not constitute a rating action.

AUSTRALIA

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings’ credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).