According to a recent report by Credit Benchmark, default risks in most EU industries are predicted to rise and peak in the second half of 2024. However, the study suggests that these default rates will mostly return to current levels by 2025, with some industries facing ongoing risks.
The CEO of Credit Benchmark, Michael Crumpler, explains that weak economic growth and high rates in the EU are contributing to the slight increase in default risk across the market. Nevertheless, the data indicates a more positive outlook for Europe compared to other major markets, and a leveling out of the rise is expected by early next year, unless there are unexpected inflationary surprises.
While the overall default rate projections are encouraging, the report highlights specific risks facing certain industries. For EU Oil & Gas firms, geopolitical risks and the shift towards renewable energy sources are generating an increasingly volatile outlook. The most likely scenario shows a 19% increase in default risk for these companies.
In the technology sector, EU firms have experienced record deteriorations, lagging behind their US counterparts. The projections suggest a marked 22% increase in default rates. Similarly, EU Telecoms face challenges with mounting infrastructure costs, interest overheads, and global satellite competition, resulting in a projected 16% increase in default risks that may persist into 2025.
Credit Benchmark’s report covers 11 EU industries, encompassing over 4,500 companies and legal entities, with a significant portion not rated by major credit rating agencies. The thorough coverage and diversified dataset allow Credit Benchmark to provide unique and credible sector-specific default risk projections for 2024/25.
The data and projections from Credit Benchmark are based on borrower probability-of-default estimates aggregated from over 40 global banks. This includes contributions from nearly half of the Global Systemically Important Banks (GSIBs) and ensures an anonymized and comprehensive analysis.
As a trusted provider of Credit Consensus Ratings and Analytics, Credit Benchmark’s insights are relied upon by leading financial institutions globally. Their data covers over 100,000 entities in approximately 170 countries and nearly 200 industries and sub-sectors, offering unprecedented access to credit risk information.
Founded in 2015 and headquartered in London, Credit Benchmark has gained recognition for its accurate credit risk analysis and is committed to providing valuable market insights to its clients.
Default Risks Expected to Increase in EU Industries, but Recover by 2025
According to a recent report by Credit Benchmark, default risks in most EU industries are predicted to rise and peak in the second half of 2024. This projection is attributed to weak economic growth and high interest rates in the European Union. However, the study suggests that these default rates will mostly return to current levels by 2025, indicating a more positive outlook for Europe compared to other major markets.
One of the industries facing ongoing risks is the EU Oil & Gas sector. Geopolitical risks and the increasing shift towards renewable energy sources are generating an increasingly volatile outlook for these firms. The report projects a 19% increase in default risk for EU Oil & Gas companies.
In the technology sector, EU firms have experienced a record deterioration in default rates, lagging behind their US counterparts. The projections suggest a marked 22% increase in default rates for EU technology companies. This underperformance is likely due to various factors such as market competitiveness and regulatory challenges.
Additionally, EU Telecoms face challenges related to mounting infrastructure costs, interest overheads, and global satellite competition. These factors contribute to a projected 16% increase in default risks for EU Telecoms. The report indicates that these challenges may persist into 2025.
It is worth noting that Credit Benchmark’s report covers 11 EU industries, encompassing over 4,500 companies and legal entities. A significant portion of these entities is not rated by major credit rating agencies. This comprehensive coverage allows Credit Benchmark to provide unique and credible sector-specific default risk projections for 2024/25.
The data and projections presented in the report are based on borrower probability-of-default estimates aggregated from over 40 global banks. This includes contributions from nearly half of the Global Systemically Important Banks (GSIBs), ensuring an anonymized and comprehensive analysis.
The advantages of Credit Benchmark’s insights lie in their status as a trusted provider of Credit Consensus Ratings and Analytics. Their data covers over 100,000 entities in approximately 170 countries and nearly 200 industries and sub-sectors. This wide coverage offers unprecedented access to credit risk information.
However, there are certain limitations to consider. The projections and estimates provided in the report are based on current data and assumptions, which are subject to change. Additionally, the report does not provide a detailed analysis of specific companies within each industry, making it challenging to evaluate individual default risks.
In conclusion, default risks in most EU industries are expected to increase in the coming years but recover by 2025, with certain industries facing ongoing risks. The report by Credit Benchmark provides valuable sector-specific default risk projections and is relied upon by leading financial institutions globally.
For more information, you can visit Credit Benchmark’s website here.