Debt levels rise; Ukrainian bank profits rebound; private equity in SPACs grows
Today is Tuesday, June 20, 2023, and here’s your weekly selection of essential intelligence on financial markets and the global economy from S&P Global Market Intelligence. Subscribe to be notified of each new Insight Weekly.
In this edition of?Insight Weekly, we put the spotlight on rising US debt levels. American households held an all-time high of $17 trillion in debt at the end of March, a 19% increase over a year earlier. This record amount and growing delinquency rates for credit cards, auto loans and mortgages are exposing fresh cracks in the US economy. Household spending has remained at fairly robust levels, but the soaring cost of servicing debt is pinching household budgets and eating into wage growth. In the corporate sector, rising capital expenditures are exerting pressure on the credit quality of regulated utilities, according to S&P Global Ratings analyst Gabe Grosberg. Debt among nonfinancial corporations has risen to around $20 trillion, nearly double what it was a decade ago. Credit quality has dropped, with some $3.6 trillion of debt rated just one notch above "junk" status. For speculative-grade companies, a surge of debt maturities in the coming years poses a growing threat to their solvency.
Ukrainian banks reported higher profits for the first three months of 2023 than for all of 2022 on the back of lower loan loss provisions and gains from investments in government debt instruments. With demand for loans subdued due to the war, banks have generated an increasing proportion of their income from securities transactions, including investments into government bonds and the central bank's deposit certificates.
More than 18% of special purpose acquisition companies (SPACs) that held an initial public offering in 2022 were backed by private equity, up 7 percentage points from 2021 and 14 percentage points from 2020, according to an S&P Global Market Intelligence analysis that tracked SPACs with at least 5% ownership by a private equity or venture capital firm.
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Debt Reckoning in Focus
Cracks appear in US economy as debt, delinquencies creep up
Amid rate hikes, banking turmoil and debt ceiling drama, US household debt exceeds record $17 trillion.
—Read the full article from S&P Global Market Intelligence
Rising interest rates do not stop US utility infrastructure, renewables spending
Industry and market observers do not see a broad risk to North American regulated utilities' capital plans or financing for renewable projects from rising debt levels.
—Read the full article from S&P Global Market Intelligence
US investment-grade companies to pull back on growth plans, deleverage
Higher borrowing costs stand to push many investment grade-rated companies to reverse course, deleverage and even work to boost their credit ratings after decades of taking on debt.
—Read the full article from S&P Global Market Intelligence
Ballooning maturity wall a growing risk for speculative-grade companies
Default rates are at a historically low levels but may start to tick up as companies face the reality of refinancing huge amounts of debt at higher rates.
—Read the full article from S&P Global Market Intelligence
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Deep Dives
In-depth features looking at the impact of major news developments in key industries.
Financials
US banks' uninsured deposits drop almost $600B in Q1 2023
The industry reported $7.118 trillion in uninsured deposits at March 31, making up 42.2% of total deposits, down from $7.716 trillion, or 44.9% of total deposits in the prior quarter.
—Read the full article from S&P Global Market Intelligence
Consumer loan net charge-offs at US banks approaching pre-pandemic levels
Net charge-offs on consumer loans at US banks continue to rise in the first quarter of 2023 and are now slightly below the levels in the second quarter of 2020. US bank executives project the trend to continue.
—Read the full article from S&P Global Market Intelligence
Ukrainian banks' profits rebound on rising securities income, lower provisions
Ukrainian banks have already earned more profit this year than in the whole of 2022. Lenders are benefiting from investing in government instruments and are recognizing losses at a slower rate.
—Read the full article from S&P Global Market Intelligence
Chinese, Japanese banks' efficiency ratios slip in Q1 as economies stay soft
Several of the biggest lenders in mainland China and Japan registered an increase in their cost-to-income ratios, a measure of operating expenses to income, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
Banks face 'Bob Ross effect,' tougher exams but 'huge' M&A on horizon
The latest "Street Talk" podcast features two panel discussions among experts in the investment community, who delivered their view of bank stocks, how institutions should react to liquidity pressures, the outlook for bank M&A and future regulation.
—Read the full article from S&P Global Market Intelligence
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Insurance
Trupanion, Lemonade, Root top shorted US insurers list
Pet insurer Trupanion had 26.50% short interest as of mid-May, according to the latest S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
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Fintech
Fintechs still eyeing banks, see the deals bringing funding benefits
The ongoing funding squeeze and heightened regulatory scrutiny continue as major themes in the financial technology sector, which slowed the pace of fintech firms buying banks. But conversations are happening behind the scenes, industry experts said.
—Read the full article from S&P Global Market Intelligence
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Real Estate
High-volatility commercial real estate lending slides to multiyear low in Q1
The aggregate high-volatility commercial real estate loan balance for US banks stood at $32.37 billion in the first quarter, down from $41.39 billion in the previous quarter, and $34.29 billion in the first quarter of 2022.
—Read the full article from S&P Global Market Intelligence
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Private Equity
Private equity's role in SPACs grows as market shrinks
Private equity-backed special purpose acquisition companies made up a larger portion of SPAC IPOs globally in the wake of the 2021 SPAC boom.
—Read the full article from S&P Global Market Intelligence
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Credit and Markets
Gap between inflation measures signals sticky price growth
The overall consumer price index continues to tumble, but without food and energy prices, inflation appears reluctant to move much from highs.
—Read the full article from S&P Global Market Intelligence
领英推荐
The G7's message of unity
In their statement on Economic Resilience and Economic Security, the G7 leadership introduced a new term into the lexicon: economic coercion.
—Read the full article from S&P Global Market Intelligence
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Asia-Pacific green bond market poised for rebound as rates stabilize
Though central banks raised rates, green bond issuance in Asia-Pacific should improve as policy tightening stabilizes, with China and Japan — the largest issuers — accelerating activity in the months ahead.
—Read the full article from S&P Global Market Intelligence
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Energy and Utilities
US, Canadian utilities raise $21.75B in May; YTD total climbs to $77.44B
In May, the sector completed 34 senior debt transactions, the largest of which was a debt issue totaling $2.5 billion.
—Read the full article from S&P Global Market Intelligence
RRA Research: Strong coastal winds fueling US offshore industry looking to break through
Inflation and supply chain woes add to a long list of hurdles delaying US offshore wind, but increasing state and federal legislative support along with favorable wind resources could be enough to help the offshore industry break out of its slump.
—Read the full article from S&P Global Market Intelligence
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Technology, Media and Telecommunications
Infotech capital markets activity drops further in April
Capital markets activity among publicly traded IT companies in the US, Canada and Bermuda slowed down to its lowest level in 2023, raising $1.91 billion, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
451 Research: Diverse network and infrastructure challenges for metaverse development
Metaverse-style applications often demand different infrastructure elements to support various architectural patterns and requirements. The network load, local and remote storage, and computing power are not one-size-fits-all solutions.
—Read the full article from S&P Global Market Intelligence
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Metals and Mining
Large gold miners' all-in sustaining costs rise in Q1 2023
Costs increased for 11 of 15 gold mining companies during the first quarter as attributable production slipped for the majority of the gold producers analyzed, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
Metals and Mining Research: Consensus price forecasts – China weakness cuts industrial metals demand
While the impending deadline for the US debt payment injected volatility into precious metals markets, China's struggling economy failed to boost base metals demand.
—Read the full article from S&P Global Market Intelligence
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Supply Chain
Air Cargo Trade Compliance – Recent Regulatory Changes
As air freight continues to prosper, cargo operators have to maintain their due-diligence procedures in relation to the shipment of "dual-use," military and sanctioned goods to mitigate the potential risk of financial and criminal penalties and protect their reputation in the market.
—Read the full article from S&P Global Market Intelligence
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The Week in M&A
Credit union-bank M&A stalemate subsides with 2 deals in 1 week
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$18.8B Magellan-Oneok deal may be in trouble because of tax issue
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SPAC deal is among 2023's largest M&A transactions
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Bank M&A 2023 Deal Tracker: Only 4 deals announced in May
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The Big Number
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Compiled by Roma Arora