COVID-19: Banks are threatened with high credit defaults worldwide
The negative consequences of the corona pandemic on the global banking business cannot be definitively predicted. As the management consultancy Accenture has calculated in a current analysis, the credit business of European financial institutions in particular is threatened by heavy losses in the second half of the year. The experts assume that the affected banks will have to write off loans totaling 415 billion Euros in 2020. Last year the value was 80 billion euros.
For the survey, Accenture examined the loan defaults and credit risk costs in recent years of a total of 117 banks worldwide. Announcements on current provisions were also included in the analysis. According to these, for example, both Deutsche Bank and Commerzbank substantially increased their provision cushions for defaulted loans in the first half of 2020. While the former has already set aside EUR 1.3 billion, Commerzbank’s reserves now total EUR 795 million.
As far as default on existing loans is concerned, the consultancy expects a rate of 2.4 percent for the current year – a significant increase compared to 2019, when the figure was 0.7 percent. The reason for the negative forecast is that the economic difficulties that many companies are facing as a result of the pandemic will probably have a delayed effect on banks. Until now, many countries have been able to support the affected companies with emergency government aid and payment deferrals; however, the support is now gradually decreasing.
Particularly high challenges will be faced by those countries that have already suffered severely from the corona crisis – both in health and economic terms. In Europe, these include Italy, Great Britain and Spain. The increased number of NPLs is already making itself felt here: Spain’s largest bank, Santander, was in the red for the first time ever in the second quarter. Accenture
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