Moody's Talks - Focus on Finance The Outlook for Banking Systems Amid Trade Tensions, Economic Risks
Mar 26, 2025
David Tao, a Banking Analyst at Moody's Ratings, shares insights on global banking systems amidst trade tensions and economic risks. He discusses the resilience of credit conditions despite potential downturns in GDP and business investment. The conversation highlights Europe's modest recovery, the varying stability of banks in different countries, and the impact of geopolitical tensions, particularly in Asia-Pacific and the Ukraine situation. Tao emphasizes diverse profitability trends across regions, providing a comprehensive outlook for the coming months.
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U.S. Banking Stability Amid Risks
- U.S. banks likely to see steady asset quality and higher profitability in near term.
- Trade tensions pose risks that could impact GDP, investment, and borrower health.
Europe's Banking Outlook Improving
- Europe's largest banks benefit from cyclical recovery and falling rates sustaining net interest margins.
- Profitability pressures persist but remain above average; asset quality faces moderate deterioration risks.
Geopolitical Risks Affect Europe
- Geopolitical tensions, including Ukraine peace uncertainty, pose risks to European banking.
- U.S. policy shifts could negatively impact asset quality, especially in export-driven economies like Germany.