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Moody's — Moody's Analytics — CCAR in a Pandemic Webinar (September 2020)

21 slides from Moody's's conference presentation, Sep 22, 2020

  1. Slide 1: CCAR in a Pandemic

    CCAR in a Pandemic Mark Zandi, Chief Economist September 2020 XXXXX, Title

  2. Slide 2: September 2020 CCAR Timeline

    September 2020 CCAR Timeline TARGET DAY PUBLICATION DATE DATABASE 0 17-Sep FRB releases its CCAR supervisory scenarios 2 19-Sep U.S. macro forecast (Q) 2 19-Sep U.S. macro forecast (M) 2 19-Sep U.S. macro forecast in Scenario Studio 4 21-Sep U.S. narratives 4 21-Sep U.S. state forecast 4.5 22-Sep Gl

  3. Slide 3: The Banking System Remains on Solid Ground

    The Banking System Remains on Solid Ground Commercial banks, % 13.5 1.6 13.0 1.4 12.5 1.2 12.0 1.0 11.5 0.8 11.0 0.6 10.5 10.0 0.4 Tier 1 capital ratio (L) 9.5 Return on assets (R) 0.2 9.0 0.0 00 02 04 06 08 10 12 14 16 18 20 Sources: FDIC, Moody’s Analytics CCAR in a Pandemic 3

  4. Slide 4: Credit Quality Is Good, but Begins to Weaken…

    Credit Quality Is Good, but Begins to Weaken… Commercial bank charge-off rate, % 11 10 C&I 9 Consumer 8 Commercial RE 7 Residential RE Credit Card 6 5 4 3 2 1 0 90 95 00 05 10 15 20 Sources: Federal Reserve Board, Moody’s Analytics CCAR in a Pandemic 4

  5. Slide 5: …and There Are Some Warning Signs

    …and There Are Some Warning Signs Loans outstanding at commercial banks, index: 2011Q1 = 100 250 230 All Loans C&I 210 Commerical RE Consumer 190 Residential RE GDP 170 150 130 110 90 11 12 13 14 15 16 17 18 19 20 Sources: Federal Reserve, Moody’s Analytics CCAR in a Pandemic 5

  6. Slide 6: Not a V-Shaped Recovery

    Not a V-Shaped Recovery Real GDP, Bil 2012$ 22,000 Baseline Alternative Severe Severely Adverse 21,000 20,000 19,000 18,000 17,000 16,000 19 20 21F 22F 23F 24F 25F Sources: Federal Reserve, BEA, Moody’s Analytics CCAR in a Pandemic 6

  7. Slide 7: GDP in CCAR and the Pandemic Scenarios

    GDP in CCAR and the Pandemic Scenarios Real GDP, $ trl 23 Baseline Alternative Severe Severely Adverse 22 Pandemic V Pandemic U Pandemic W 21 20 19 18 17 16 19 20 21 22 23 24 Sources: BEA, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 7

  8. Slide 8: Unemployment in CCAR and the Pandemic Scenarios

    Unemployment in CCAR and the Pandemic Scenarios Unemployment rate, % 30 Baseline Alternative Severe Severely Adverse 25 Pandemic V Pandemic U Pandemic W 20 15 10 5 0 19 20 21 22 23 24 Sources: BLS, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 8

  9. Slide 9: Persistently High Unemployment

    Persistently High Unemployment Unemployment rate, % 14 13 Alternative Severe 12 Severely Adverse 11 Baseline 10 9 8 7 6 5 4 3 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Sources: BLS, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 9

  10. Slide 10: House Prices Sink…

    House Prices Sink… CoreLogic HPI, Index Jan 2000=100, SA 260 Baseline 240 Alternative Severe 220 Severely Adverse 200 Peak-to-Trough 180 % Decline = 30.0% Peak-to-Trough % 160 Decline = 28.0% 140 120 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Sources: Federal Reserve, Moody’s Analytics

  11. Slide 11: …Mainly in the South and Mountain West

    …Mainly in the South and Mountain West Case-Shiller index, % over-undervalued U.S. = 9% < -6% -6% to 0% 0% to 9% > 9% Sources: CoreLogic, FHFA, Moody’s Analytics CCAR in a Pandemic 11

  12. Slide 12: Commercial RE Crashes As in the Crisis…

    Commercial RE Crashes As in the Crisis… Commercial RE price index 350 Baseline Alternative Severe Severely Adverse 300 Peak-to-Trough % Decline = 250 37.9% Peak-to-Trough % Decline = 200 35.0% 150 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Sources: Federal Reserve, Moody’s Analytics CC

  13. Slide 13: …and the Stock Market Suffers a Bit More

    …and the Stock Market Suffers a Bit More S&P 500 index 4,000 Baseline Alternative Severe Severely Adverse 3,500 3,000 2,500 Peak-to-Trough 2,000 % Decline = 45.9% Peak-to-Trough 1,500 % Decline = 50.0% 1,000 500 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Sources: Federal Reserve, Moody

  14. Slide 14: Corporate Credit Under High Stress…

    Corporate Credit Under High Stress… Severely Adverse Scenario 7 80 BBB Corporate rate spread, % ( L) 6 Market Volatility Index (R ) 60 5 4 40 3 20 2 1 0 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: S&P, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 14

  15. Slide 15: …In Both Scenarios

    …In Both Scenarios Alternative Severe Scenario 7 80 6 BBB Corporate rate spread, % (L) 60 5 Market Volatility Index (R ) 4 40 3 20 2 1 0 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: S&P, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 15

  16. Slide 16: Firm Inflation, Despite GDP Collapse…

    Firm Inflation, Despite GDP Collapse… Severely adverse scenario, % change yr ago 10 8 6 4 2 0 -2 -4 CPI inflation -6 Real GDP growth -8 -10 08 10 12 14 16 18 20F 22F 24F Sources: BLS, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 16

  17. Slide 17: …and Surging U.S. $

    …and Surging U.S. $ U.S. real broad trade weighted $ 125 120 Baseline 115 Alternative Severe 110 Severely Adverse 105 100 95 90 85 80 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sources: Federal Reserve, Moody’s Analytics CCAR in a Pandemic 17

  18. Slide 18: ZLB…But No Negative Rates

    ZLB…But No Negative Rates Severely adverse scenario, % 7 3-month Treasury rate 6 10-year Treasury yield 5 Mortgage rate 4 3 2 1 0 -1 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Sources: Freddie Mac, Federal Reserve, Moody’s Analytics CCAR in a Pandemic 18

  19. Slide 19: Further Questions:

    Further Questions: Email us at help@economy.com

  20. Slide 20: Contact Us: Economics & Business Analytics Offices

    Contact Us: Economics & Business Analytics Offices West Chester, EBA-HQ London Prague Singapore +1.610.235.5299 +44.20.7772.5454 +420.22.422.2929 +65.6511.4400 121 North Walnut Street, Suite 500 One Canada Square Washingtonova 17 6 Shenton Way West Chester PA 19380 Canary Wharf 110 00 Prague 1 #14-0

  21. Slide 21: CCAR in a Pandemic

    © 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most “MOODY’S”). All rights

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