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Crowd-sourced Credit Transitions

Transition matrices can provide considerable insight into the likely pattern of losses over various time horizons - providing support for compliance with the CECL and IFRS9 accounting rules that require banks and corporates to estimate potential losses over the entire life of a loan. A recent whitepaper published by Credit Benchmark, compares bank-sourced transition matrices with the traditional estimates published by the main credit rating agencies.

Bank credit analysts turning positive on Italy despite rising yields and “Italexit” risks

The European Central Bank’s tapering of QE purchases has had a negative impact on Italian government bond yields. The Eurozone’s third biggest economy has been burdened by debt, political uncertainty and economic stagnation. However, with signs that these problems are finally being addressed, bank credit views of Italy are improving.

Turkish vote potential lose-lose for credit

Turkey’s sovereign Credit Benchmark Consensus rating is moving further from investment grade and the probability of default is rising. The macro picture is poor and the constitutional referendum next week could be the catalyst for more volatility.

February Credit Update: More Downgrades Than Upgrades

We have published credit data for February, with 12 contributor banks now providing crowd-sourced credit views (CBC*) on more than 8,000 separate legal entities. Downgrades outnumber upgrades this month.

Credit analysts positive as Deutsche’s €8 billion rights issue comes to market

Deutsche Bank has tapped equity investors for more capital three times since 2013. The coolheaded reaction of credit analysts to its latest rights issue suggests that they believe the €8 billion in new funding will put the bank on a surer footing, giving new management a realistic chance of executing its ambitious restructuring plan

Optimistic bank view on Rheinmetall underpinned by global defence trends

Geopolitics is driving increased military spending; European defence companies are likely beneficiaries and banks are particularly optimistic on Rheinmetall.

Banks sanguine over “Frexit” risk

In the run-up to the Brexit referendum Credit Benchmark’s data showed the clear possibility of a “Leave” vote, with IRB banks effectively downgrading the UK Government from aa+ to aa. Despite market volatility, bank credit analysts seem far more sanguine about Marine Le Pen’s chances of winning the French presidential election and “Frexit”. The CBC for France is stable and the aggregate probability of default is falling.

No light touch regulation for insurers post-Brexit, but flexible approach to illiquid credit

Prudential Regulation Authority CEO Sam Woods says wholesale changes to insurance regulation are unlikely. However, he offers hope of greater flexibility in key areas such as the Matching Adjustment and internal models, if insurers can demonstrate credit and risk management expertise

Sony, Yahoo, Moog, Apache, and Seagate move to Investment Grade

Banks have recently moved a number of companies to investment grade (bbb- or better). Some of these moves reflect broader sector trends and others are company-specific.

UK Sovereign risk rising despite strong Gilt performance

Gilt issuance by the UK is at its lowest in a decade, and 10-year gilt spreads are at a 25-year low versus US Treasuries. But bank-sourced data shows growing concern about UK Sovereign risk.