Global Banks Brace for Nearly $1 Trillion in Credit Losses

S&P Global predicts global banks will face nearly $1 trillion in credit losses this year, even as the economic outlook shows signs of improvement.

According to the firm’s Global Credit Outlook 2025 report, credit conditions are expected to remain generally favorable as major economies achieve soft landings and central banks shift toward more accommodating monetary policies.

Despite these positive trends, S&P Global anticipates a 7% increase in credit losses, projecting a total of $850 billion for 2025. The firm notes that most banking groups maintain stable ratings, but rising bad debts and delinquencies are likely to strain the sector. This forecast could worsen if global credit markets encounter unexpected challenges.

The report warns that the path to improved credit conditions is fraught with risks, including slowing economic growth, renewed inflationary pressures, and political uncertainty. These overlapping threats could spark periods of market volatility, complicating recovery efforts.

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In the U.S., S&P Global highlights additional uncertainty tied to political changes. President-elect Donald Trump’s proposed economic policies, such as increased tariffs, could disrupt the current trajectory. Higher tariffs may reignite inflation and force the Federal Reserve to pause or even reverse its monetary easing cycle, potentially affecting credit quality across North America.

While a soft landing for the U.S. economy is anticipated, the report cautions that evolving policies could undermine credit conditions, leaving borrowers exposed to greater risks and threatening stability in the broader financial system.

Alexander Zdravkov