zeb.market flash (Issue 20 – January 2017) 2016 with a happy ending for the banking sector—however, high market uncertainties for 2017

Key Topics

I. State of the banking industry

  • The banking industry has been the biggest winner in the latest stock market rally. The global top 100 banks boosted their market cap (+18.2%) and outperformed all other industries (TSR of +17.2%).
  • Especially US banks benefited from increasing US rates and the market trends due to the election of Donald Trump.

II. Economic environment and key banking drivers

  • Upward movements of global long-term yields as well as the latest Fed decision led to steeper EURIBOR and USD LIBOR yield curves.
  • The US Dollar was further strengthened by the result of the US election and increasing US interest rates—EUR/USD exchange rate has reached the lowest value for more than 10 years.
  • European and BRICS banks’ RoE shrank on average by 0.6pp to 5.7% and 0.5pp to 15.4% respectively—US banks further improved their profitability by 0.5pp to 8.9%.

III. Special topic: Trumpflation—“Make interest rates great again”?

  • High expectations towards Donald Trump’s political agenda led to a sharp increase in global long-term government bond yields.
  • Concrete economic consequences are not clear yet and a sustainable spillover to Europe is rather doubtful—European banks still have to deal with low interest rates and high market uncertainties in 2017.

 

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Author Dr. Dirk Holländer

Dr. Dirk Holländer

Senior Partner Office Frankfurt

Volker Abel

Senior Manager zeb Frankfurt
Author Dr. Ekkehardt Bauer

Dr. Ekkehardt Bauer

Senior Manager Office Münster

Dr. Benedikt Rotermann

Manager Office Münster

Maximilian-Josef Kaulvers

Senior Consultant Office Münster

Autoren

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