UK banking systems continue to “look resilient” according to Goldman Sachs (NYSE:GS) analysts, with the implication of tighter lending set to be “quite a bit smaller” than during the global financial crisis.
Goldman forecasted “a manageable drag on growth,” based on the fallout from ongoing struggles of Credit Suisse in Europe and efforts to stem contagion from Silicon Valley Bank’s collapse in the US, reassuring the sectors were equipped to handle issues.
Tightening bank lending is set to cause the main drag, according to Goldman, prompting a 0.3% hit to European GDP and 0.5% in the UK.
As a result, the bank anticipates UK GPD to remain flat for the year at 0%, with 0.7% growth in Europe.
Meanwhile, the European Central Bank will likely hike interest rates by 25 base points in May, while the Bank of England “is more likely than not” to implement a similar rise this week, Goldman predicted.
It added these rises could be the last rate hikes, suggesting an end was in sight for rising interest, which would therefore come to rest at 3.5% in the Eurozone and 4.25% in the UK.
The bank added that estimating the response to stress was difficult and that uncertainties remain, but based on its models Europe and UK banks look “sound” to weather the storm.