CCAR 2021 - Standard Fare: February 2021

CCAR 2021 – Standard Fare
February 2021
XXXXX, Title
1 Timeline – Ahead of Schedule
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 Global macro forecast
5 17-Feb Global macro forecast in Scenario Studio
5 17-Feb Global financial markets database
6 18-Feb U.S. metro area forecast
6 18-Feb Bank call report forecasts
7 19-Feb Case-Shiller® Home Price Index Forecast
8 20-Feb CreditForecast.com
9 21-Feb Autocycle
10 22-Feb Global macro narratives
CCAR February 2021 3

2 Banking System Holds Firm
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

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
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

…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

3 CCAR 2021 – Standard Fare
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

…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

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

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

House Prices Sink…
CoreLogic HPI, Index Jan 2000=100, SA
280
260
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

…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

Commercial RE Biggest Pandemic Casualty
Commercial RE price index
350
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

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

…Although It Is Tough
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

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

…and Surging U.S. $
U.S. real broad trade weighted $
115
110
105
100
95
90
85
80
05 07 09 11 13 15 17 19 21F 23F

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

4 PRA and EBA Scenarios
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
Monetary Policy Rate, % House Price Index, Index 1991Q1=100, SA

3.0 320
PRA stress EBA stress CCAR stress PRA stress EBA stress CCAR stress
2.5 300
2.0 280
1.5 260
1.0 240
0.5 220
0.0 200
16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F
Sources: Fed, EBA,PRA, Moody’s Analytics

U.K. Stress Test Scenario Forecasting
Real GDP, Bil. 2018 GBP, SAAR Unemployment Rate, %
2,300 14
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
Monetary Policy Rate, % House Price Index, Index 2010=100, SA

1.2 150
1.0 140
0.8 130
0.6 120
0.4 110
0.2 100
0.0 90
-0.2 80
16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F

Euro Zone Stress Test Scenario Forecasting
Real GDP, Bil. Ch. 2010 EUR, CDASAAR Unemployment Rate, %
11,500 14
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 24F 25F

0.4 140
0.3 130
120
0.2
110
0.1
100
0.0
90
-0.1 80
16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F

China Stress Test Scenario Forecasting
Real GDP, Bil. 2015 CNY, SAAR Unemployment Rate, %
130,000 6.0
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 23F 24F 25F

3.5 170
3.0 160
150
2.5
140
2.0 130
1.5 120
1.0 110
100
0.5
90
0.0 80
16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F

Developing Asia Stress Test Scenario Forecasting
Real GDP, Bil. 2012 USD, SAAR Unemployment Rate, %
27,000 12
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 23F 24F 25F
Lending Rate, % House Price Index, Index 2012=100, SA

5.8 170
5.6 160
5.4
150
5.2
5.0 140
4.8 130
4.6
120
4.4
4.2 110
4.0 100
16 17 18 19 20 21F 22F 23F 24F 25F 16 17 18 19 20 21F 22F 23F 24F 25F

Further Questions:
Email us at help@economy.com
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

…But Not That Much Tougher
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

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CCAR 2021 – Standard Fare

CCAR February 2021 3

CCAR February 2021 5

CCAR February 2021 7

CCAR February 2021 8

CCAR February 2021 10

CCAR February 2021 11

CCAR February 2021 12

CCAR February 2021 13

CCAR February 2021 14

CCAR February 2021 15

CCAR February 2021 16

CCAR February 2021 17

CCAR February 2021 18

CCAR February 2021 19

CCAR February 2021 20

CCAR February 2021 21

Monetary Policy Rate, % House Price Index, Index 1991Q1=100, SA

Sources: Fed, EBA,PRA, Moody’s Analytics

CCAR February 2021 23

Monetary Policy Rate, % House Price Index, Index 2010=100, SA

Sources: Fed, EBA,PRA, Moody’s Analytics

CCAR February 2021 24

Monetary Policy Rate, % House Price Index, Index 2015=100, SA

Sources: Fed, EBA,PRA, Moody’s Analytics

CCAR February 2021 25

Monetary Policy Rate, % House Price Index, Index 2010=100, SA

Sources: Fed, EBA,PRA, Moody’s Analytics

CCAR February 2021 26

Lending Rate, % House Price Index, Index 2012=100, SA

Sources: Fed, EBA,PRA, Moody’s Analytics

CCAR February 2021 27

CCAR February 2021 29

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