Banks to log $82b losses in 2024: S&P

This is due to credit costs normalisation and not asset problems.

Banks globally are expected to log almost $1.67b in credit losses to end-2025, according to estimates by S&P Global Ratings. Annually, this represents a $82b loss in 2024, an 11% rise from a year earlier.

For 2025, a more modest rise of $10b, a 1% rise from 2024, is expected.

"We estimate that banks' credit cost ratios--credit losses as a proportion of customer loans– will average around 80 basis points a year over the two years to end-2025," said S&P Global Ratings credit analyst Osman Sattar.

Sattar said that whilst this is worse than the average of 73 basis points between 2021 to 2023, it does not indicate significant or widespread asset quality problems.

“We see this as a normalisation of credit costs,” Sattar said. “In addition, our estimates indicate that credit losses would need to be more than 5x higher than we forecast before they would deplete bank capital rather than earnings.”

Downside risks have also receded, but Sattar warned that they remain significant. 

“The still-high levels of many sovereigns' indebtedness diminish their capacity to support their economies, exposing banks more directly to borrowers facing repayment stresses,” he said.

Falling commercial property prices could also expose banks to losses from loan exposure or slowing economic activity.

"Under stress, we see credit losses as more likely in banks' commercial real estate, unsecured retail, and small and midsize enterprise lending portfolios," Sattar said.