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1. Financial Services sector stability & profitability comes under pressure – stock valuations and prices come down.

2. Central banks bring down interest rates – if a significant part of the asset book is flexible rate, then interest margins are affected.

3. Lower business and consumer transactions – lower fee income.

4. Less liquidity from government as they need to finance deficits. And deferred spending – negative liquidity impact.

5. Number of corporate banking sectors negatively affected. Example – oil & gas, consumer durable, automotive. Increased number of work out accounts, likelihood of NPAs, and reduced income.

6. SME/Commercial clients under pressure for many sectors – reduced demand and delayed payments from customers. Larger number of NPAs, work out accounts, and reduced income and a smaller trade finance book.

7. Wealth Management not so wealthy any more. Portfolio values down. AUM down. Conversion to cash preserve capital. Resulting in fee income reduction. Also margin calls.

8. Retail book stressed. Less liquidity, and asset quality under threat. Part of mortgage book impacted. Reduced spends on cards, auto and personal loans. Loss of income also resulting in higher NPAs. Also limited growth.

9. Branch utilization drops off – fear of visit, fewer transactions.

10. Basically the full revenue & cost model affected – urgent need to transform, including job losses.

Potential winner – digital channels and digital banking ? Read the fixes and the suggestions for the best way forward out of this crisis in the next memo !

Regards

Chairman, IBS Intelligence

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