zeb.market flash (Issue 17 – April 2016)

KEY TOPICS

1. State of the banking industry

  • Global capital markets were massively distressed during the first quarter of 2016—significant loss of
    market cap. (global top 100 banks: -12.1%), decline in P/B ratios of around 9% on average and the
    lowest TSR performance of all industry sectors
  • Among global top 100 banks, especially shareholders of Western European banks had a very rough
    quarter losing 15.2% on average

2. Economic environment and key banking drivers

  • Worsening economic figures for China and the ECB’s decision to further expand its ultra-loose
    monetary policy (rate on main refinancing operations reduced by 5bp to 0.0%, new series of targeted
    longer-term refinancing operations, TLTRO II) dominated the economic environment in Q1 2016
  • Business climate deteriorated again with figures declining for at least the third consecutive month
  • In Q1 2016, Western European banks once again reported massive bottom line issues for the second
    half of 2015—full year post-tax return on equity of just 6.0%

3. Special topic: Sell-off in European banking industry—fundamental reasons or exaggerated fear?

  • Negative TSR performance goes along with a significant reduction in the profitability outlook for
    respective banks
  • Pessimistic profitability outlook combined with bad news from the Chinese economy created toxic
    sentiment leading to a strong reaction in the capital market

Picture: Skyline New York

Feel free to contact us!

Author Dr. Dirk Holländer

Dr. Dirk Holländer

Senior Partner Office Frankfurt

Volker Abel

Senior Manager zeb
Author Dr. Ekkehardt Bauer

Dr. Ekkehardt Bauer

Senior Manager Office Münster

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