On the eve of the holiday shopping season, Fitch Ratings says the retail sector is unlikely to threaten banks’ ratings given their limited exposure, strong core earnings and healthy capital levels. However, disruption to retailers from e-commerce underscores the need for banks to stay abreast of technological change and adjust their exposures accordingly.

Large banks are actively reducing exposure to the most challenged retail segments and using asset-based lending to limit their retail sector risk. Fitch estimates that balance sheet exposures to retailer commercial real estate and retail commercial loans represent 9% and 14%, respectively, of common equity tier 1 capital in aggregate across large Fitch-rated U.S. banks. Retail exposure in banks’ securities portfolios is minimal; only 2% of portfolios in aggregate are invested in CMBS that do not carry a government or government-sponsored entity guarantee.

U.S. retail loan default rates have risen sharply to about 7% this year (on a trailing 12-month basis) after several years below 1%. Fitch says they will reach 10% next year as brick-and-mortar sales continue to decline in the face of online sales.

Not all retailers are equally challenged. Retailers of consumer staples are more susceptible to disruption from online competitors than convenience stores and grocery stores, for example, although Amazon’s recent acquisition of Whole Foods could signal that will change.