McKinsey Chart of the Day

Global banks steel themselves against larger potential loan losses than seen in the Great Recession

COVID-19
Banking
Financial services

In anticipation of a sharp increase in personal and corporate defaults due to the COVID-19 crisis, global banks have provisioned $1.15 trillion for loan losses through the third quarter of 2020—more than they did in all of 2019. We project that loan-loss provisions in the coming years will exceed those of the global financial crisis.

Global loan-loss provisions: 1st 3 quarters of 2020 > all of 2019, could exceed global financial crisis by 2021 (charts)

Globally, loan-loss provisions in the first three quarters of 2020 surpassed those for all of 2019, and by 2021 they could exceed those of the global financial crisis.

Nominal provisions for loan losses, 2006–20E (fixed 2019), $ billion
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 actual through Q3 Full-year 2020 projection, A1 muted recovery
272 352 656 960 720 672 720 608 624 648 736 720 712 768 1104 1504
Provisions as a percentage of total loans, %. Actuals 2006–2019; projections by scenario 2020–2024.
Year Actual A3 faster recovery A1 muted recovery B2 stalled recovery
2006 0.48 N/A N/A N/A
2007 0.56 N/A N/A N/A
2008 recession 1 N/A N/A N/A
2009 recession 1.38 N/A N/A N/A
2010 1.02 N/A N/A N/A
2011 0.9 N/A N/A N/A
2012 0.94 N/A N/A N/A
2013 0.76 N/A N/A N/A
2014 0.75 N/A N/A N/A
2015 0.74 N/A N/A N/A
2016 0.82 N/A N/A N/A
2017 0.75 N/A N/A N/A
2018 0.7 N/A N/A N/A
2019 0.73 N/A N/A N/A
2020 recession N/A 1.1 1.34 1.34
2021 recession N/A 1.26 1.84 1.94
2022 N/A 0.82 1.36 1.46
2023 N/A 0.76 1 1.14
2024 N/A 0.72 0.8 0.9

Notes

Source: SNL Financial; McKinsey Panaroma Global Banking Pools

McKinsey & Company

To read the report, see “McKinsey's Global Banking Annual Review,” December 9, 2020.