Moody's Talks - Focus on Finance

Rokhaya Cisse and Marina Cremonese of the Asset Management team explore why the pandemic fallout has dimmed revenue prospects and made growth harder for asset managers. Plus, Celina Vansetti-Hutchins looks at how a difficult operating environment and elevated asset risk are driving our negative outlook for financial institutions in emerging markets.​​​ Inside this episode:Celina Vansetti-Hutchins looks at how a difficult operating environment and elevated asset risk are driving our negative outlook for financial institutions in emerging markets.​​​ (begins at 1:58)Rokhaya Cisse and Marina Cremonese of the Asset Management team explore why the pandemic fallout has dimmed revenue prospects and made growth harder for asset managers. (begins at 8:35) Related content:Asset Management - Global: 2021 outlook negative as coronavirus crisis intensifies long-term headwinds (Slides) - Increased market volatility, an uneven economic recovery and competitive environment in the ongoing pandemic will likely weaken global asset managers’ revenue and hamper growth amid an increased cost of doing business as regulators intensify their review of asset managers’ products and activities.Financial Institutions – Emerging Markets: 2021 outlook negative as operating environments heal from pandemic and asset risk remains a wild card  - Banks face challenging conditions and loomin​g asset risk, while pressures on insurers’ capital are rising despite lockdown-driven one-off gains from fewer claims having boosted profitability.  

Edoardo Calandro, David Fanger and Daniel Yu of the Banking team zero in on the COVID-19 pandemic’s effects on bank loans in the UK, US and Australia. Plus, Shachar Gonen of the Insurance team and Keith Banhazl of the Structured Finance team look at how much the slowdown in commercial real estate will weaken US life insurers’ CMBS holdings.​ Inside this episode:Shachar Gonen of the Insurance team and Keith Banhazl of the Structured Finance team look at how much the slowdown in commercial real estate will weaken US life insurers’ CMBS holdings.​ (begins at 2:10)Edoardo Calandro, David Fanger and Daniel Yu of the Banking team zero in on the COVID-19 pandemic’s effects on bank loans in the UK, US and Australia. (begins at 7:48)Related content:Life Insurance – US: Credit deterioration picks up in CMBS holdings but capital is resilient. CMBS remains a moderate component in US life insurers’ investment portfolios. The industry’s CMBS credit quality remains strong and capital levels are robust to absorb deterioration.CMBS-US: Moody's DQT - New delinquencies suppressed by temporary relief of forbearance and loan modification agreements. Moody’s CMBS conduit loan Delinquency Tracker (DQT) decreased to 7.51% in September 2020, as forbearance and other loan modifications provide loan relief.Financial Institutions — Banks – Cross Region: Pandemic induced credit losses set to rise. The coronavirus pandemic has pushed many countries into recession, leading to a deterioration in credit conditions that will trigger a significant increase in bank loan losses.

Inside this episode:Banks will benefit from an increased customer base as accelerated digitalization makes financial services available to unbanked populations in emerging markets. But traditional banks face competition as big tech firms impinge on payment services and central banks explore creating their own digital currencies as a defensive move.​​​​​​​Related content:Banks – Emerging Markets: Technology is deepening financial inclusionBanks – China, Europe, and US: Digitalization is breaking banks' historical dominance in retail paymentsBanking – Global: Central bank digital currencies would compound digital disruption for banks 

Original publish date: October 21, 2020Inside this episode:Simon Ainsworth and James Eck of the Insurance team discuss the latest developments in global insurers’ efforts to assess and manage climate risk. ​​​​​(begins at 2:27)​​Stefan Kahandaliyanage of the Insurance team lays out the risks US health insurers face from a policy drive toward a public insurance option. (begins at 10:04)Related content:Health Insurance – US: Policy drive toward transformation of health insurance poses risks to profitability - Proposals to create a public health insurance option would likely reduce earnings at our rated companies to varying degrees, with more expansive options having a larger impact.P&C Insurance and Reinsurance – Global: Climate change risks outweigh opportunities for P&C (re)insurers - P&C (re)insurers have significant exposure to the economic consequences of climate change, including risks arising from catastrophe exposures, claims on liability policies, and investmentInsurance – Europe: Insurers increasingly engaged as ESG risks and opportunities come into focus - European insurers see environmental, social and governance (ESG) issues as an area of strategic focus, and expect them to have a moderately adverse impact on underwriting risk.Financial Institutions – Europe: BoE climate change stress tests will reinforce risk management for banks and insurers - Climate change stress tests are credit positive as they will help banks and insurers understand the consequences of climate change for their business, and support their risk management.Allianz, AXA, Swiss Re, Munich Re, Zurich: Retreat from coal reduces liability and stranded asset risk, a credit positive  - Major European (re)insurers are limiting their investment and underwriting exposure to coal. This protects them against climate change liability risk, and the risk of asset stranding.Moody’s Banking Series - ​​The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​

Original publish date: October 7, 2020Inside this episode:Olivier Panis of the Banking team and Stefan Kahandaliyanage of the Asset Management team update financial institutions’ readiness for the transition away from Libor in 2021.​​​ (begins at 1:34)As policy rates continue to decline globally, Banking team member Laurie Mayers examines the effect on UK banks, while Shunsaku Sato does so for Japanese banks and Farooq Khan for Brazilian banks. (begins at 7:34)Related content:Financial Institutions – Global: IBOR phaseout 15 months away, but hurdles could stretch beyond finish line - We surveyed 85 banks and non-bank financial institutions to gauge their preparedness for the transition to overnight Alternative Reference Rates from IBOR-linked contracts.Banks – Japan: Low rates and slow cost-cutting amid excess capacity will keep profitability weak - Banks in Japan will continue to face ultralow rates as extremely accommodative monetary policy remains in place, while having difficulty in cutting costs due to structural rigidity.Banks – United Kingdom: Low for longer rates will exacerbate margin pressure for UK banks - With rates likely to stay low for longer than expected as a result of the coronavirus crisis, we expect pressure on UK banks' margins to intensify.Banks – Brazil: Net interest margins will be tested as rates stay low for longer - Brazilian banks will face margin pressure from higher funding costs and increased competition, despite a positively sloped yield curve amid record low rates and recovering economy .Moody’s Banking Series - ​​The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​

Original publish date: September 23, 2020Inside this episode:Peter Nerby and Michael Rohr of the Banking team discuss how global systemically important banks entered the coronavirus crisis with healthier balance sheets, capital and liquidity than before the last global downturn (begins at 8:14). Ceres Lisboa explains how Latin American banks risk a sharp deterioration in asset quality as payment deferrals and government aid lapse (begins at 2:05).​Related content:Banks – Latin America: Coronavirus resets economies at lower base driving asset risks in 2020 and beyond - Banks face uneven effects of pandemic as contagion continues. Deferrals and government aid help but asset risks are rising. Reserve buffers are only adequate to absorb a mild loss scenario. Banks – Global: Biggest banks are better set to withstand COVID-19 stress than banks as a whole - The 30 global systemically important banks (G-SIBs) are better prepared to withstand the adverse effects of the COVID-19 pandemic than the universe of Moody’s-rated banks as a whole. BAC, CS, JPM, MS and UBS: Stable wealth-management arms of largest Swiss and US banks are a credit positive offset to COVID-19 disruption - We compare the wealth management divisions of the five largest global investment banks (BAC, CS, JPM, MS and UBS) rated by us and assess their prospects for the future. Moody’s Banking Series - ​​The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​

Original publish date: September 9, 2020Inside this episode:James Eck explains why threats to profitability turned the outlook on global reinsurers negative. (begins at 1:20)Laura Bazer tells us how the coronavirus shock jolted global life insurers into a new, more digital future. (begins at 7:04)Related content:Reinsurance – Global Outlook turns negative as profitability weakens, despite higher pricing - Our negative outlook on the reinsurance sector reflects uncertainty around coronavirus-related losses, as well as persistent low interest rates and lower reserve releases.Life Insurance – Global: Life insurers go virtual, tech sorts winners from losers post coronavirus - Technology will be a key differentiator of life insurers in the future.Moody’s Banking Series - ​​The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​_   

Original publish date: August 26, 2020Inside this episode:Antonello Aquino from the Insurance team explains why European insurers are giving back premiums now and might have to cover more claims later because of the pandemic. (begins at 1:59)Banking team analyst Alka Anbarasu details the government support India’s public-sector banks will need to maintain capital strength as credit costs rise in COVID-19’s wake. (begins at 9:09)​​​​​​​​​Related content:Coronavirus fallout will leave banks with capital shortages again- As the coronavirus outbreak hurts India's economy growth, sharp increases in credit costs will erode banks' profit. Consequently, banks will face large capital shortfalls again.Insurers face increasing social and legal risks arising from coronavirus- European non-life insurers are under political, social and legal pressure to surrender one-off profits generated during the coronavirus crisis or pay additional coronavirus-related claims.Moody’s Banking Series - The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​

Original publish date: August 12, 2020Inside this episode:Alessandro Roccati from the banking team explains how coronavirus-driven demand for contactless digital financial services, along with remote work, are raising the cyber threat to banks. (begins at 8:21)Steve Tu of the asset management team looks at how the latest US government intervention in money markets could signal an eventual phaseout of institutional prime funds. (begins at 1:45)Related content:Money Market Funds – US: Most recent intervention could mark a turning point for institutional prime funds - Large sponsors are now exiting the product rather than risking having to support their institutional prime funds.Cyber risk rises as coronavirus drives increased digital banking and remote work - Social distancing has increased digital banking and remote work by bank employees, leading to increased cyber risk. Most banks have developed cyber risk awareness and mitigation measures.Moody’s Banking Series - ​​The Series digital program is free and offers exclusive interviews, thematic panel discussions and regional deep dives.​