COVID-19 Quadruple U.K. Bank Credit Losses

S&P Global Ratings' credit loss estimates for U.K. banks reflect the radically more negative environment as a result of the COVID-19 pandemic with a 6.5% forecasted GDP decline in the U.K. The consequences--including higher unemployment and corporate failures--will feed through into bank asset quality and higher credit losses. A rebound in 2021, with GDP growth of 6.0% is expected but risks remain skewed to the downside, and the effects of COVID-19 will be evident for long after the crisis subsides. A deterioration in asset quality could pressure bank ratings if the temporary slowdown turns into a protracted recession. Recent first-quarter results from the major U.K. banks confirmed a sharp uptick in reported credit losses, ranging between 93 bps and 233 bps of customer loans on an annualized basis.