The International Monetary Fund (IMF) has released its Global Financial Stability Report for the second half of 2017. While much progress has been made in regulations and reserves, and while consumers are far less leveraged now than ahead of the Great Recession, the IMF has also shown that some of the world’s largest financial institutions could struggle to remain sufficiently profitable in the coming years.

The United States already has conducted its own stress tests covering U.S. entities and foreign entities that operate here, but the IMF report looked at the banks that might have trouble if widespread issues were to pick back up.

A main point of the biannual review is that the global financial system is continuing to strengthen. Policies and regulations were cited for causes, but the IMF also cited the cyclical upturn in growth. Despite the positive tone of the progress since the recession, the IMF still feels that problems even in a single one of these institutions could create systemic stress.

What also stood out here is that nine of the 30 international banks in the Financial Stability Board were cited by the IMF as having a consensus analyst estimate of less than 8% in return on equity in the year 2019. Before thinking that there are many more banks that can absorb any blows, the IMF noted that these 30 top financial institutions hold more than $47 trillion in assets and that this represents more than a third of the world’s loans and assets held by all banks.

The report said:

Global bank balance sheets are stronger because of improved capital and liquidity buffers, amid tighter regulation and heightened market scrutiny. However, some banks are still grappling with legacy issues and business model challenges, where progress has been uneven. The environment of continuing monetary accommodation — necessary to support activity and boost inflation — may lead to a continued search for yield where there is too much money chasing too few yielding assets, pushing investors beyond their traditional habitats.

The following banks were called out by name.

Citigroup Inc. (NYSE: C) was named, but this after the U.S. Federal Reserve recently allowed for a great return of capital with higher dividends and buybacks.

Deutsche Bank A.G. (NYSE: DB) was one of three European banks called out by the IMF, followed by Societe Generale and UniCredit Group. Despite the concerns on Deutsche Bank, its local shares in Frankfurt have recovered 35% from their lows over the past year. It has had more capital restrictions meeting at the same time as subpar loan demand in Germany, weaker trading and more capital constraints.

Barclays PLC (NYSE: BCS) and Standard Chartered were the two British banks named as being at-risk by the IMF report. Barclays shares in London have traded lower in 2017, down about 20% so far in 2017. The Barclays CEO has faced regulatory pressure and a sagging share price.

The top Asian banks called out in the report were Sumitomo Mitsui Financial Group, Mizuho Financial Group and Mitsubishi UFJ Financial Group.

Investors and economists are still likely to focus on the good points of this IMF report rather than the risks posed. That being said, any hiccups in the global growth story or any more international geopolitical issues might turn the tide back to focusing on risks over rewards.

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