Credit Benchmark’s inaugural Default Risk Outlook draws on an extensive database of over 100,000 unique Credit Consensus Ratings (CCRs). These CCRs represent the internal risk views of expert analysts at the world’s leading banks – a previously untapped source of risk intelligence. 90% of the entities with CCRs are not rated by a major credit rating agency, meaning these projections offer a new and significant capacity for analysing default risk.
Although this report focuses on US Industries, the methodology can be applied to the broad and highly representative dataset of 100,000+ CCRs. The default projections can be customized for our clients to match their own classification schemas and align more accurately with their portfolios and exposures.
Vigilant risk management is vital when navigating an unpredictable economic climate. With broader, deeper, and more frequent analytics than previously available, Credit Benchmark is now able to offer the market a comprehensive and differentiated view on default risks.
If you would like a free and fully confidential analysis of the default risk projections of your own portfolio, we encourage you to get in touch here.
Change (%) in the probability of default (PD) during 2023
We predict that default^ risks will continue to rise and peak by mid-2024 across most sectors, except for technology and telecoms which will likely peak in late H2. Credit quality should generally recover in H2 2024 if rate cuts go ahead and barring further escalation of geopolitical risks.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default risks to rise slightly, peak by mid-2024 and ease thereafter
Credit distribution by ratings category
Projected 2024 default rate
Monthly balance of deteriorations vs improvements / number of entities
Distribution of entities across rating categories (%)
* Covering all corporate sectors, including those discussed in this report, but excluding financial institutions.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
¹ Fallen angels are credits that have fallen from investment grade into the high-yield or speculative-grade category.
Post-Covid improving trend to stall on lower interest income, higher debt provisions
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Long-term projected observed default rate (ODR)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Creditworthiness to improve slightly in 2024, with further drop in default rate
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Long-term projected observed default rate (ODR)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Deterioration bias easing in 2024 but modest rise in default risk amid slower growth
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Projected default rate, rolling 12 months
Credit distribution by ratings category
* Covering the manufacture of industrial goods and services, e.g., constructions materials, aerospace, electronic equipment and components, defense equipment, railroads, marine transportation, industrial machinery, commercial vehicles and trucks, etc.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Modest rise in default risk in 2024 despite strong demand in some sub-sectors
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Projected default rate, rolling 12 months
Credit distribution by ratings category
* Covering the mining industries for aluminum, iron, steel, coal, gold platinum and precious metals, non-ferrous metals, as well as forestry and paper products.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default risk to climb in 2024, with rise in proportion of high-yield borrowers
Long-term projected observed default rate (ODR)
Projected 2024 default rate
Distribution of entities across rating categories (%)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Sharp increase in default risk likely in 2024 amid fall in discretionary spend
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Projected default rate, rolling 12-month
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default risk to rise modestly in 2024 amid slowing tech investment
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Long-term projected observed default rate (ODR)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Significant increase in default risk given uncertainty over network battles and M&A
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Distribution of entities across rating categories (%)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default risk to nudge up as sector’s share of GDP growth shrinks
Projected default rate, rolling 12-month
Projected 2024 default rate
Distribution of entities across rating categories (%)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Minimal change in default risk masks company-specific differences
Long-term projected observed default rate (ODR)
Projected 2024 default rate
Distribution of entities across rating categories (%)
Projected default rate, rolling 12 months
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Stable outlook as sector recovers – but office/industrial segment still troubled
Monthly balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Long-term projected observed default rate (ODR)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Risk levels to continue rising given HY concentration – but lower interest rates will help
12-month balance of deteriorations vs improvements / number of entities
Projected 2024 default rate
Long-term projected observed default rate (ODR)
Credit distribution by ratings category
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
2023 trends in probabilities of default (PD) across peer industries and sub-sectors
Pharma outperformed Healthcare industry
In Consumer Goods sector, household products underperformed home building
Chemicals was a major laggard in the Basic Materials sector
In the Consumer Goods industry, the Autos segment held up well
Despite a high federal funds rate, US growth was strong in 2023 overall, with sector-specific factors determining how each sector fared. If inflation continues to slow in 2024, the expected rate cuts will ease funding conditions and drive a credit recovery in H2 – but significant geopolitical uncertainties, especially potential disruptions to supply chains, pose downsides to this outlook.
Additional definitions and explanations
