Moody's Corporation · NYSE:MCO

Moody's — Moody's Analytics — CCAR Scenarios Webinar (February 2021)

32 slides from Moody's's conference presentation, Feb 17, 2021

  1. Slide 1: CCAR 2021 – Standard Fare

    CCAR 2021 – Standard Fare February 2021 XXXXX, Title

  2. Slide 2: Timeline – Ahead of Schedule

    1 Timeline – Ahead of Schedule

  3. Slide 3: February 2021 CCAR Timeline

    February 2021 CCAR Timeline Target day Publication date Database 0 12-Feb FRB releases its CCAR supervisory scenarios 2 14-Feb U.S. macro forecast (Q) 2 14-Feb U.S. macro forecast (M) 2 14-Feb U.S. macro forecast in Scenario Studio 4 16-Feb U.S. narratives 4 16-Feb U.S. state forecast 4.5 17-Feb Glo

  4. Slide 4: Banking System Holds Firm

    2 Banking System Holds Firm

  5. Slide 5: U.S. Banking System Navigates the Pandemic Well

    U.S. Banking System Navigates the Pandemic Well Commercial banks, % 14 1.6 1.4 13 1.2 12 1.0 0.8 11 0.6 0.4 10 Tier 1 capital ratio (L) Return on assets (R) 0.2 9 0.0 00 02 04 06 08 10 12 14 16 18 20 Sources: FDIC, Moody’s Analytics CCAR February 2021 5

  6. Slide 6: European Banks are Well-Capitalized, but Less Profitable

    European Banks are Well-Capitalized, but Less Profitable Commercial banks, 2020Q3, % 20 0.6 18 16 0.5 14 0.4 12 10 0.3 8 6 0.2 4 0.1 2 0 0.0 Tier-1 ratio RoA (annualized)* *as of 2020Q2 for euro zone and U.K. Sources: Fed, ECB, BoE, Moody’s Analytics CCAR February 2021 6

  7. Slide 7: Credit Quality Has Held Up…

    Credit Quality Has Held Up… 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 February 2021 7

  8. Slide 8: …and Credit Growth Ample

    …and Credit Growth Ample 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 February 2021 8

  9. Slide 9: CCAR 2021 – Standard Fare

    3 CCAR 2021 – Standard Fare

  10. Slide 10: Painful Double-Dip Recession…

    Painful Double-Dip Recession… Real GDP, bil 2012$ 22,000 Baseline 21,000 Severely Adverse 20,000 19,000 18,000 17,000 19 20 21F 22F 23F 24F 25F Sources: Federal Reserve, BEA, Moody’s Analytics CCAR February 2021 10

  11. Slide 11: …With Persistenty High Unemployment

    …With Persistenty High Unemployment Unemployment rate, % 14 13 Severely Adverse 12 Baseline 11 10 9 8 7 6 5 4 3 08 10 12 14 16 18 20 22F 24F Sources: BLS, Federal Reserve, Moody’s Analytics CCAR February 2021 11

  12. Slide 12: Stock Market Is Hammered

    Stock Market Is Hammered S&P 500 index 4,500 4,000 Severely Adverse Baseline 3,500 3,000 2,500 Peak-to-Trough % Decline = 2,000 45.9% Peak-to-Trough 1,500 % Decline = 55.0% 1,000 500 05 07 09 11 13 15 17 19 21F 23F Sources: Federal Reserve, Moody’s Analytics CCAR February 2021 12

  13. Slide 13: 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 10 12 14 16 18 20 22F 24F Sources: S&P, Federal Reserve, Moody’s Analytics CCAR February 2021 13

  14. Slide 14: House Prices Sink…

    House Prices Sink… CoreLogic HPI, Index Jan 2000=100, SA 280 260 Severely Adverse Baseline 240 220 200 Peak-to-Trough 180 % Decline = Peak-to-Trough % 30.0% Decline = 23.5% 160 140 120 05 07 09 11 13 15 17 19 21F 23F Sources: Federal Reserve, Moody’s Analytics CCAR February 2021 14

  15. Slide 15: …Mainly in the Overvalued South and Mountain West

    …Mainly in the Overvalued South and Mountain West Case-Shiller index, % over-undervalued U.S. = 8.5% < -6% -6% to 0% 0% to 9% > 9% Sources: CoreLogic, FHFA, Moody’s Analytics CCAR February 2021 15

  16. Slide 16: Commercial RE Biggest Pandemic Casualty

    Commercial RE Biggest Pandemic Casualty Commercial RE price index 350 Severely Adverse Baseline 300 250 Peak-to-Trough Peak-to-Trough % Decline = % Decline = 37.9% 40.0% 200 150 05 07 09 11 13 15 17 19 21F 23F Sources: Federal Reserve, Moody’s Analytics CCAR February 2021 16

  17. Slide 17: CCAR Severe Adverse Not Quite As Tough as MA S4…

    CCAR Severe Adverse Not Quite As Tough as MA S4… Real GDP, Bil 2012$ 22.0 21.5 Fed Base MA Base Fed Severe MA S4 21.0 20.5 20.0 19.5 19.0 18.5 18.0 17.5 17.0 19 20 21 22 23 24 Sources: Federal Reserve, BEA, Moody’s Analytics CCAR February 2021 17

  18. Slide 18: …Although It Is Tough

    …Although It Is Tough Unemployment rate, % 14 13 Fed Base MA Base Fed Severe MA S4 12 11 10 9 8 7 6 5 4 3 19 20 21 22 23 24 Sources: BLS, Federal Reserve, Moody’s Analytics CCAR February 2021 18

  19. Slide 19: 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 February 2021 19

  20. Slide 20: …and Surging U.S. $

    …and Surging U.S. $ U.S. real broad trade weighted $ 115 110 105 Severely Adverse Baseline 100 95 90 85 80 05 07 09 11 13 15 17 19 21F 23F Sources: Federal Reserve, Moody’s Analytics CCAR February 2021 20

  21. Slide 21: ZLB…But No Negative Rates

    ZLB…But No Negative Rates Severely adverse scenario, % 7 6 3-month Treasury rate 10-year Treasury yield Mortgage rate 5 4 3 2 1 0 -1 08 10 12 14 16 18 20 22F 24F Sources: Freddie Mac, Federal Reserve, Moody’s Analytics CCAR February 2021 21

  22. Slide 22: PRA and EBA Scenarios

    VAN PRA and EBA Scenarios

  23. Slide 23: U.S. Stress Test Scenario Forecasting

    U.S. Stress Test Scenario Forecasting Real GDP, Bil. Ch. 2012 USD, SAAR Unemployment Rate, % 22,000 20 PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress 21,000 15 20,000 19,000 10 18,000 5 17,000 16,000 0 16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F Monetar

  24. Slide 24: U.K. Stress Test Scenario Forecasting

    U.K. Stress Test Scenario Forecasting Real GDP, Bil. 2018 GBP, SAAR Unemployment Rate, % 2,300 14 PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress 2,200 12 2,100 10 2,000 8 1,900 6 1,800 4 1,700 2 1,600 0 16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F Moneta

  25. Slide 25: Euro Zone Stress Test Scenario Forecasting

    Euro Zone Stress Test Scenario Forecasting Real GDP, Bil. Ch. 2010 EUR, CDASAAR Unemployment Rate, % 11,500 14 PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress 11,000 13 12 10,500 11 10,000 10 9,500 9 8 9,000 7 8,500 6 16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F

  26. Slide 26: China Stress Test Scenario Forecasting

    China Stress Test Scenario Forecasting Real GDP, Bil. 2015 CNY, SAAR Unemployment Rate, % 130,000 6.0 PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress 120,000 5.5 110,000 100,000 5.0 90,000 4.5 80,000 4.0 70,000 60,000 3.5 16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F

  27. Slide 27: Developing Asia Stress Test Scenario Forecasting

    Developing Asia Stress Test Scenario Forecasting Real GDP, Bil. 2012 USD, SAAR Unemployment Rate, % 27,000 12 PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress 11 25,000 10 23,000 9 8 21,000 7 19,000 6 5 17,000 4 15,000 3 16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23

  28. Slide 28: Further Questions:

    Further Questions: Email us at help@economy.com

  29. Slide 29: CCAR 2021 Somewhat Tougher Than Resubmisson… 2020

    CCAR 2021 Somewhat Tougher Than Resubmisson… 2020 Real GDP, $ trl 23 2021 Baseline 2021 Severely Adverse 22 2020 Severely Adverse 2020 Alternative Severe 21 20 19 18 17 16 19 20 21F 22F 23F 24F Sources: BEA, Federal Reserve, Moody’s Analytics CCAR February 2021 29

  30. Slide 30: …But Not That Much Tougher

    …But Not That Much Tougher Unemployment rate, % 14 12 10 8 6 4 2021 Baseline 2021 Severely Adverse 2 2020 Alternative Severe 2020 Severely Adverse 0 19 20 21F 22F 23F 24F Sources: BLS, Federal Reserve, Moody’s Analytics CCAR February 2021 30

  31. Slide 31: 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

  32. Slide 32: CCAR February 2021

    © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit

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