Nine banks face struggle: IMF

Business | Dominique Nguy and Reuters 13 Oct 2017

The International Monetary Fund named nine banks that could struggle in coming years to remain sufficiently profitable.

They are Deutsche Bank, Citigroup, Barclays, Societe Generale, UniCredit Group, Standard Chartered, Sumitomo Mitsui Financial Group, Mizuho Financial Group and Mitsubishi UFJ Financial Group.

"About a third of banks by assets may struggle to achieve sustainable profitability, underscoring ongoing challenges and medium-term vulnerabilities," said IMF in its biannual Global Financial Stability Report.

IMF said consensus among private sector bank analysts was the return on equity for each of those nine banks in 2019 might be less than 8 percent.

Meanwhile, the IMF said the global economic recovery has strengthened financial stability but easy monetary and financial conditions against a backdrop of sluggish inflation is elevating medium-term risks.

The IMF also noted risks are rotating from banks, which have fortified their balance sheets, to financial markets as credit spreads compress, volatility declines and asset prices rise.

"While increased risk appetite and search for yield are a welcome and intended consequence of unconventional monetary policy measures . . . there are risks if these trends extend too far," the IMF said.

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