Kroll Bond Rating Agency Releases Research Report: Credit Outlook Q3 2016

NEW YORK--(BUSINESS WIRE)-- Kroll Bond Rating Agency (KBRA) has released a new Financial Institutions research report entitled “Credit Outlook Q3 2016: Slowing Asset Appreciation, Increased Volatility in Prospect.” The report makes the following key points:

• As U.S. markets near the release of Q3 2016 earnings for financial institutions, Kroll Bond Rating Agency (KBRA) notes that credit conditions continue to reflect a benign profile overall, even as it becomes apparent that the increase in asset prices engineered by the Federal Open Market Committee (FOMC) over the past five years is nearing an end.
• At the start of 2016, investor concerns about energy prices and China’s economy saw credit spreads widen considerably to more than 500 basis points between investment-grade and high-yield securities, causing investment activity to slow substantially. While credit spreads have narrowed in recent months, any suggestion of a further tightening of FOMC policy could see this positive trend in spreads reversed. In such a scenario, KBRA would expect to see more days such as last Friday, when equity markets and credit spreads saw above-normal volatility.
• Although the credit quality of the aggregate loan book at U.S. banks continues to improve, U.S. banking institutions are clearly trying to add risk (and thus duration) to their books to counter the erosion of margins due to the FOMC’s interest-rate policy. As the third quarter ends, KBRA believes that the major point of vulnerability for banks generally will come from unanticipated events that lead to increased market volatility, which almost directly translates into less activity in the capital markets, lower earnings, and asset write-downs for large-cap banks and a flight to quality by investors.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

View source version on businesswire.com: http://www.businesswire.com/news/home/20160913006474/en/

Analytical Contact:
KBRA
Christopher Whalen, 646-731-2366
Senior Managing Director
[email protected]

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Source: Kroll Bond Rating Agency

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