US Banks’ Willingness to Lend May Not Improve This Year
Fitch Ratings says a survey of senior fixed income investors finds that banks’ reluctance to lend is seen as the highest risk to the credit markets over the next 12 months. What’s more, nearly 40% of respondents don’t expect banks’ willingness to lend to stabilize this year.
“A deep or very deep recession will grip the U.S., Europe and emerging markets over the coming year, and the economic downturn is likely to last one to two years across all regions, according to the most recent Fitch Ratings/Fixed Income Forum Survey of Senior Fixed Income Investors”
In the bi-annual survey, conducted in January, expectations for stability in the housing market were pushed further back, with 57% of respondents not expecting normal conditions to return before 2010. However, most investors believe that credit market stability will return sometime in 2009 (77% expressed this view).
In a notable reversal from the mid 2008 survey, and clearly a consequence of the speed and severity of the economic downturn, the recent survey showed greater receptivity on the part of investors to the expanded role of government in the credit markets.
Banks’ reluctance to lend received the most votes as a high risk to the credit markets over the next 12 months and nearly 40% of respondents believe that banks’ willingness to lend will not stabilize this year.
“Interestingly, the corporate area with the most votes (40%) for some improvement over the coming year was financials. However, 44% of investors also expected improvement among financials in the June 2008 survey. In fact, responses on the outlook for financials continued to be among the most diverse. Views were also notably divided on whether the bigger risk going forward is inflation or deflation.
For full survey results see Grim 2009 Economic and Credit Market Outlook From Senior U.S. Fixed Income Investors.
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