According to S&P Global the profitability of banks in Italy is destined to endure, while i drops in interest rates will be reflected only gradually on theirs performance. The rating agency in its report on the global prospects of the banking sector claims that in most Italian institutions credit losses will remain manageable, but at the same time the differences between the various banks will become more evident.
The Italian framework
S&P Global predicted one average increase of 1% on loans disbursed next year, after the minus 2% estimated for the whole of 2024. “It is likely that economic conditions will stabilize, while we expect a GDP recovery by 1%,” the rating agency’s analysts estimated. “However the high levels of deficit and public debt weigh heavily on the government’s ability to further support the economy,” he added. The agency also predicted that the average level of return on capital of Italian banks will continue to be above 10% in 2025.
The global picture
Globally, S&P believes there will be one relative stability of ratings in 2025expressing a “cautious optimism” for the banking sector. Currently, around 80% of banking groups have a stable outlook and the agency expects this trend to continue in 2025. S&P has however estimated that the Global credit losses will increase by about 7%, reaching $850 billion in 2025. S&P has identified four main ones riba risksss for bank ratings: a unexpected slowdown of the economy global, a deterioration of real estate sector worse than expected, interest rates still high which add to the high leverage of governments and businesses, and finally, various evolving risks, including new technologies (such as artificial intelligence), climate change and cyber, which could broaden credit differentiation , since adaptation to such changes could prove positive or negative.
The Trump effect
S&P does not expect tailwinds at a macro level, sufficient to strengthen the creditworthiness of banks. Despite this, he doesn’t even believe that the recent US presidential victory of Donald Trump can have a negative impact on the sector. Banks, in general, will adapt well to any second-order impacts from rising global trade tariffs or other changes following the U.S. election, S&P said.
