Macro Research From soaring inflation to the Russia | FSMOne SG - Research Highlights

Macro Research

From soaring inflation to the Russian-Ukraine war, what’s next for global banks?

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• The world is anticipating an aggressive rate hike cycle. It is evident that short-term rates are moving up, and with higher interest rates, comes higher net interest income.

• Several of the major banks’ managements shared that they are still expecting to see loan growth in 2022 as corporations continue to ramp up capital expenditure to meet rising consumer demand.

• Consumer spending is likely to remain resilient, generally supported by the demand for services as international borders reopen again.

• Majority of global banks have been significantly reducing exposure to Russia ever since the invasion of Crimea in 2014, and they continue to maintain strong capital positions despite risk-weighted assets (RWA) inflation due to higher market risk.

• Recession risk remains to be the biggest risk that global banks are facing now. A recession will materially affect the banks’ outlook given the cyclical nature of the banking industry.

• Overall, we believe that the global economic outlook will remain constructive for the global banks, and investors can expect almost 30% upside potential from them by the end-2024.

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