zeb/market flash (Issue 8 – January 2014) Western banks with strong performance in 2013 and narrowing valuation gap with BRICS – 2014 outlook for European banks clouded

Key topics

1. State of the banking industry

  • US and Western European banks continue their strong TSR performance in Q4 2013 with 12.0% and 6.6% respectively leaving BRICS banks with negative performance far behind
  • Valuation of BRICS financial institutions further decreased and is now below valuation of US banks for the first time

2. Key banking drivers

  • Economic conditions further improved in mature markets, especially in the US with a GDP growth rate of 3.6% in Q3 2013 – emerging markets still at high level with negative trend regarding GDP growth
  • Long-term interest rates in the US and Germany continued to increase resulting in steeper yield curves – yield curve for BRICS remains flat

3. Special topic: Low interest rates and changing regulations –consequences of the double burden for banking stability in Europe

  • Double burden of low interest rate and regulation will have massive effect on profitability and the capitalization at European banks
  • Holistic actions required to overcome challenging situation
Picture: International Financial Center, Moscow
Download zeb/market flash (Issue 8 – January 2014)

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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

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