Why Delinquencies Could Spoil The Soft Landing For Banks

With inflation easing and talk of a “Goldilocks scenario” abundant, banks might be tempted to think that the economic tides have turned. At the risk of outing myself as a banking Cassandra, I must point out that there are very good reasons why risk could be poised for a comeback later this year and into 2024, via a rise in consumer delinquencies.

Finances are stretched today, and more consumers are falling behind on loan or credit card payments. The pandemic boost from government stimulus and a pause on student loan payments in the U.S. are shrinking in the rearview as more consumer credit scores slide back into sub-prime territory.