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Fitch: Large US Banks Keeping a Lid on Retail Sector Exposure
November 13, 2017 / 3:02 PM / 5 days ago

Fitch: Large US Banks Keeping a Lid on Retail Sector Exposure

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Banks Chart of the Month here NEW YORK, November 13 (Fitch) The largest U.S. banks are keeping their exposure to the beleaguered retail sector in check, Fitch Ratings says in its latest Banks Chart of the Month. The retail sector is unlikely to threaten the banks' ratings given their limited exposure, strong core earnings and healthy capital levels. However, disruption to retailers from e-commerce underscores the need for banks to stay abreast of technological change and adjust their exposures accordingly. Large banks are actively reducing exposure to the most challenged retail segments and using asset-based lending to limit their retail sector risk. Fitch estimates that balance sheet exposures to retailer commercial real estate and retail commercial loans represent 9% and 14%, respectively, of common equity tier 1 capital in aggregate across large Fitch-rated U.S. banks. Retail exposure in banks' securities portfolios is minimal; only 2% of portfolios in aggregate are invested in CMBS that do not carry a government or government-sponsored entity guarantee. U.S. retail loan default rates have risen sharply to about 7% this year (on a trailing 12-month basis) after several years below 1%. We forecast them to reach 10% next year as brick-and-mortar sales continue to decline in the face of online sales. Not all retailers are equally challenged. Retailers of consumer staples are more susceptible to disruption from online competitors than convenience stores and grocery stores, for example, although Amazon's recent acquisition of Whole Foods could signal that this is changing. Fitch's Banks Chart of the Month is available at www.fitchratings.com or by clicking the above link. Contact: Christopher Wolfe Managing Director Financial Institutions - Banks +1 212 908-0771 Fitch Ratings, Inc. 33 Whitehall Street New York, NY Michael Shepherd, CPA Associate Director Financial Institutions - Banks +1 212 908-9138 David Prowse Senior Analyst Fitch Wire +44 20 3530 1250 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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