zeb/market flash (Issue 9 – April 2014) Global banking industry with a groggy start in 2014—BRICS even destroying value

Key topics

1. State of the banking industry

  • Market capitalization of global banking industry almost unchanged
  • US banks strengthened leading position regarding valuation
  • BRICS institutions with negative TSR performance, increased CDS spreads and rating downgrades (e.g. uncertainty about Crimea crisis in Russia)

2. Key banking drivers

  • Western European economic recovery continued in Q4 2013, but rising concerns about possible deflation
  • German and US long-term yields decreased in Q1 2014, leading to flatter yield curves and reduced maturity transformation
  • Major Western European banks reported low results for Q4 2013

3. Special topic: Asset Quality Review (AQR) challenges largest European institutions

  • AQR as core element of the ECB‘s comprehensive assessment running since end of February
  • Capital gap expected only for few institutions by most market participants
  • Not fully disclosed framework for stress testing causes high uncertainty

Picture: Skyline Shanghai

Download zeb/market flash (Issue 9 – April 2014)

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