zeb/market flash (Issue 5 – April 2013) Banking sector remains on recovery track driven by overall market momentum – however, economic and business challenges persist

Key topics

1. State of the banking industry

  • In Q1 2013, the upward trend of recent quarters continued as market capitalization reached highest value since 2010
  • Investors continue to favor commercial banks; gap between mature and growth markets narrows
  • CDS spreads of Western European banks again increased significantly in March 2013 due to the recent market turmoil in Cyprus

2. Key banking drivers

  • Interest rates remain at historic lows, but are not yet fully reflected in business margins
  • Banks’ RoE forecasts predict increasing RoEs despite weak economic fundamentals

3. Special topic: Succeeding in a low interest rate environment

  • A detailed analysis shows that the current low interest rate level may reduce net interest income of banks by up to 14%, thus threatening banks’ profitability
  • Only a differentiated and effective set of strategic initiatives will help banks to limit the losses occurring from low interest rates
Picture: Skyline Hong Kong
Download zeb/market flash (Issue 5 – April 2013)

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