Today is Tuesday, July 05, 2022, and here’s your weekly selection of essential intelligence on financial markets and the global economy from S&P Global Market Intelligence. Subscribe to be notified of each new Insight Weekly.
In this edition, we examine the results of the U.S. Federal Reserve's stress tests, which are conducted annually to help ensure that large banks have the capacity to keep lending during a severe recession. Losses projected under this year's stress tests are higher than last year, putting upward pressure on capital requirements and creating another headwind for shareholder payouts. Bank of America, Citigroup and JPMorgan face higher-than-anticipated increases in their stress capital buffers, likely constraining stock buybacks.
Signs are emerging that the U.S. housing market is starting to weaken after a run of record-shattering prices. Surging mortgage rates have significantly curbed the spending power of potential homebuyers, prompting sellers to sharply reduce the prices of their homes. This environment is the inevitable outcome of the Fed's push for tighter monetary conditions, according to realtors and economists.
Wide swaths of the U.S. are being strained by drought as summer begins, heightening anxieties over hydroelectric operations and possible power outages, especially in the severely dehydrated Southwest. This summer's vast grid vulnerabilities highlight the need for technological, regulatory and market advances to support the new technologies being integrated into the grid, innovators and reliability experts said.
- In Focus: US Bank Stress Tests
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Stress tests show bigger capital deterioration for large banks
The results could put upward pressure on banks' capital needs, though the Fed said banks continued to demonstrate that they could keep lending during a severe recession.
—Read the full article from S&P Global Market Intelligence
Fed stress tests worse than expected at BofA, Citi and JPMorgan Chase
The three banks face higher-than-anticipated increases in their stress capital buffers, likely constraining stock buybacks.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Financials
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US banking-as-a-service providers post stronger profitability metrics than banks
Profitability metrics of banking-as-a-service providers vary widely, indicating the complexity of this increasingly popular business model, but most reported better-than-average metrics when compared to the banking industry median.
—Read the full article from S&P Global Market Intelligence
Italy's biggest banks show improved asset quality in Q1'22
The problem loans ratios of UniCredit, Banco BPM and BPER Banca improved on a yearly basis but remain among the highest in Europe, according to data from S&P Global Market Intelligence.
—Read the full article from S&P Global Market Intelligence
Competition heats up as banks try to cash in on UAE's IPO boom
A glut of privatizations is creating advisory opportunities for domestic and international banks, but the fees generated are much lower than in U.S. IPOs.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Insurance
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US workers' compensation premiums up 9.3% in Q1 as direct loss ratio improves
Among the largest workers' comp underwriters, Liberty Mutual logged the highest direct loss ratio in the first quarter of 2022.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Real Estate
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Cracks emerge in US housing market as record high prices meet surging rates
The price of a typical U.S. home rose above $400,000 for the first time, but signs of weakening are increasing across the sector.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Credit and Markets
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Spike in distressed debt signals greater default potential
Bankruptcy and restructuring professionals say they are hearing more from banks and businesses that are preparing for troubles ahead.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Private Equity
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Private equity drives robust wealth management M&A
Deal volume hit all-time highs in 2021 and could go higher this year, despite some headwinds.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Energy and Utilities
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Vast grid reliability risks to test US energy transition this summer
Drought, heat waves, wildfires, supply chain disruptions, cyberattacks and equipment failures are among the unprecedented perils facing U.S. power supply this summer, especially in the renewable energy-rich West.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Metals and Mining
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Strong mining investment expected as recession fears spark buying opportunities
Institutional investors will likely continue to pour money into the mining space, eyeing profits from an expected widening supply gap for industrial metals despite recession fears across other markets.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Technology, Media and Telecommunications
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Apple grows gaming market share as App Store dominates mobile space
Even though it does not produce any of its own gaming hardware or software, the App Store has turned Apple into one of the biggest earners in the industry.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: ESG
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Lack of high-quality iron ore supply threatens steel's green push
Steelmakers need higher-grade iron ores for making steel using green hydrogen, but a lack of raw materials may stymie the push for less emissions-intensive metals.
—Read the full article from S&P Global Market Intelligence
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- The Week in M&A
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Illinois leads the US with 10 bank M&A announcements in 2022
Regulatory hurdles shut down VyStar CU, Heritage Southeast deal
$1.4B pet insurance deal shows need for distinct reporting for fast-growing line
Sberbank firesale provides boost for local lenders in former Yugoslavia
Lithium Power deal leads metals, mining M&A for week ended June 24
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Written and compiled by Louis Bacani