ING – Banks Outlook, 2024

The ING Banks Outlook 2024 provides a comprehensive overview of the challenges and opportunities that financial institutions will face in the coming year. Several key topics are discussed, including the maturing of the European Central Bank's targeted longer-term refinancing operations (TLTROs), the impact of the European Taxonomy on banks' disclosures, the review of capital requirements regulation, concerns surrounding commercial real estate, factors driving bank bond supply, and the outlook for ESG (environmental, social, and governance) supply by banks. In terms of liquidity and funding, the maturing of TLTROs in 2024 will test bank liquidity, and the use of existing liquidity buffers to absorb the further LTRO runoff may result in increased bank bond issuance, particularly for Italian and German banks. The European Taxonomy is also highlighted as a significant development, with banks gearing up for more disclosures and slightly improving their eligibility ratio, albeit with some methodology differences hindering comparability. The review of capital requirements regulation is expected to continue in 2024, and banks will need to take action to implement the final policy. Concerns regarding commercial real estate persist, particularly for Nordic banks, although these assets do not appear to be among the most vulnerable to climate change transition risks in Europe. The outlook for bank bond supply in 2024 remains positive, with expected high supply reaching €455bn, driven by factors such as sluggish lending volumes, less reliable deposit developments, the end of ECB funding support, stable bond redemptions, and a more mature stage for bail-in senior markets. Additionally, ESG primary market activity by banks is expected to stay strong in 2024, albeit slightly less prosperous than in 2023, with banks continuing to identify new assets suitable for ESG issuance.