Credit portfolio managers remain cynical on the global economy despite the recovery of equity markets since March, according to the second-quarter survey from the International Association of Credit Portfolio Managers.
The vast majority of surveyed credit managers, 87%, forecast rising loan defaults over the next 12 months globally. By region, 95% see defaults rising in North America, 91% in Europe, and 82% in Australia.
The least negative region appears to be Asia, with 67% of surveyed managers believing corporate defaults will rise in that region over the next 12 months.
"I think that's a reflection that Asian countries have managed the (COVID-19) pandemic in a way that they look significantly better, but of course things change day to day," said Som-lok Leung, IACPM's executive director, in a telephone interview.
Mr. Leung said credit managers feel there is a disconnect between equity markets and what they are dealing with on a day-to-day basis.
"Most of the IACPM members are banks," he said. "These people are managing bank portfolios which are primarily corporate credit loans." Those companies are in distress, he said, "dealing with their lines of credits, asking for amendments, extensions, all these kinds of things to weather the current storm."
The Aggregate Credit Default Outlook index for the next 12 months rose to -83.5 in the most recent survey, improving from -90.3 in the previous quarter. A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
The outlook is slightly better overall, Mr. Leung said, but "not appreciably better."
The index swooned in every region, but North America has the lowest index number at -92.3, up from -94.3 the previous quarter, while Asia had the highest at -63, up from -82.6 a quarter earlier.
The survey is conducted among IACPM members, which consist of credit portfolio managers at more than 100 financial institutions in the U.S., Europe, Asia, Africa and Australia.