Global Banking &
Capital Markets
Key themes from 3Q15
earnings calls
November 2015
Contents
Top 10 key themes: 3Q15 earnings season
3
Top 10 themes: a quarter-over-quarter comparison
4
Key themes overview
5
1.
Earnings performance: profit trends diverge, but weak revenue growth is evident across the industry
5
2.
Macro-challenges: macro environment becomes difficult to manage
7
3.
Expenses: efficiency deteriorates amid warnings that cost pressures will persist in coming years
8
4.
Capital plans: how much capital is enough for European banks to resume dividend payouts?
10
5.
Regulatory and compliance: banks expect capital burden to increase when new rules are finalized
11
6.
Cross-border: slower GDP growth forecast does not deter commitment to Asia-Pacific
12
7.
Lending: growth trends take hold, although margin compression remains in place
13
8.
Innovation: investments in digital become compulsory
14
9.
Credit quality: macro uncertainties prompt heightened monitoring of selected portfolios
15
10.
Acquisitions and divestments: European banks continue to reshape through business exits and asset sales
16
Appendix
17
Key themes addressed, by bank
17
Key themes addressed, by bank (contd)
18
Select KPIs
19
Scope, limitations and methodology of the review
20
Global Banking & Capital Markets: key themes from 3Q15 earnings calls
2
Top 10 key themes: 3Q15 earnings season
“Challenging environments have become the norm, and the work we’ve done to make our firm simpler,
smaller, safer, and stronger has given us a resilient and sturdy platform from which to operate.”
Mike Corbat, CEO, Citigroup
Largely constructive first half of the year gives way to negative third quarter. In the years since the financial crisis,
banks have become accustomed to managing through significant external headwinds related to regulatory reform, macroeconomic issues and disruptive geopolitical events. Despite the industry-wide expectation that challenging conditions will
persist, the third quarter operating environment was exceptionally difficult. State Street’s CEO noted that “Global equity
markets posted their worst quarter since the third quarter of 2011,” and ANZ CEO Mike Smith observed that “Customer
activity stopped, which is quite unusual.”
With the escalation of macro challenges, the question becomes: have banks sufficiently transformed themselves to manage
through an environment that is unlikely to improve materially in the foreseeable future? Management comments during the
3Q15 earnings season revealed a range of responses to this question.
•
With headwinds particularly impacting fixed income trading, Goldman Sachs remained committed to this business,
which has undergone a series of adjustments, as opposed to a large-scale transformation. CFO Harvey Schwartz said,
“We will always look for additional opportunities to improve our Fixed Income, Currencies and Commodities (FICC)
operations; however, we will also never lose sight of the tremendous value that we can bring to our FICC clients over
the long term.”
•
At UBS, management asserted that transformation efforts have been completed, and the bank’s new strategy is
delivering. CEO Sergio Ermotti stated, “The strategic change we initiated four years ago was driven by our desire to
focus on our core strengths and expectations of more demanding regulation. So, having completed our
transformation, we have the right business model today, with no need for further radical change to comply with the
strict new too-big-to-fail proposals and with the competitive landscape.”
•
And finally, Credit Suisse, Deutsche Bank and Standard Chartered all unveiled new plans for dramatic strategic
transformations to address what Deutsche Bank CEO John Cryan described as “historic underperformance” and to
fulfill Standard Chartered’s aspiration of “being acceptably and then excitingly profitable.”
Group-level reported return on equity (ROE), 3Q15
2.9
12.0 12.6
9.0 9.1 9.6 10.9 11.2 11.3
5.6 5.7 6.7 7.0 7.0 7.1 7.4 8.0
14.1 14.9 15.9
18.1 20.4
23.3
26.8
-34.8
3Q15
3Q14
Source: Company reports; Quarterly ROE data not disclosed at ANZ, BBVA, Crédit Agricole, Intesa Sanpaolo, Lloyds Banking
Group, Macquarie Group, NAB, Royal Bank of Scotland, Standard Chartered and Unicredit.
Note: Please see Appendix for key to company symbols.
Global Banking & Capital Markets: key themes from 3Q15 earnings calls
3
Top 10 themes: a quarter-over-quarter comparison
3Q15
Rank*
2Q15
Earnings season top 10 themes (arranged
from most common to least common) —
35 banks
Rank*
Earnings season top 10 themes (arranged
from most common to least common) —
32 banks
1
Quarterly earnings performance
1
Quarterly earnings performance
2
Macro-challenges
2
Macro-challenges
3
Expense trends
3
Expense trends
4
Capital strength and plans
4
Capital strength and plans
5
Regulation and compliance
5
Regulation and compliance
6
Cross-border and location strategies
6
Cross-border and location strategies
7
Lending trends
7
Lending trends
8
Innovation
8
Credit quality trends
9
Credit quality trends
9
Acquisitions and divestments
10
Acquisitions and divestments
10
Innovation
*Note: Please see Appendix for an explanation of the ranking methodology.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
4
Key themes overview
1.
Earnings performance: profit trends diverge, but weak revenue growth is
evident across the industry
“Broadly speaking, the revenue environment is fairly challenging for us.”
Iain Mackay, Group Finance Director, HSBC
Bank results include record profits for some and steep losses for others. In describing earnings performance,
management offered characterizations ranging from “disappointing” and “very poor” to “solid” and “strong.” At Credit
Suisse, CEO Tidjane Thiam said, “it was not good quarter.” In contrast, Intesa Sanpaolo CEO Carlo Messina proclaimed,
“[We] announced the best results in the history of Intesa Sanpaolo.” ROE* increased at only eight banks when compared to
3Q14, reversing the trend from the previous quarter, when all but seven banks reported higher returns. For the most part,
improved returns reflected the positive impact of non-recurring benefits, as opposed to meaningful business growth:
•
Legal and conduct charges at Bank of America, Citigroup and HSBC were significantly lower than in 3Q14.
•
JPMorgan Chase, State Street and UBS each reported a boost from tax benefits.
•
Results at BNP Paribas included a €487 million capital gain from the sale of a 7% stake in Klépierre.
•
Société Générale benefited from the revaluation of its own financial liabilities.
Revenue performance was weak across the sector, with only two banks — BBVA and Itaú — generating double-digit growth.
More than half of the banks included in this analysis saw revenues decline from 3Q14, reflecting pressure from persistently
low interest rates, difficult market conditions and the impact
Percentage change in litigation and conduct-related
of business exits.
costs from 3Q14, selected banks
•
•
•
Jonathan Pruzan, CFO, Morgan Stanley: “In contrast to
the first half, the third-quarter backdrop was less
constructive. Besides the normal summer seasonality, the
quarter was characterized by global equity markets
trending lower, volatility metrics increasing, spreads
widening, policy uncertainty and periodic bouts of risk
aversion.”
Stephan Engels, CFO, Commerzbank: “Revenues in the
core bank decreased by 12% quarter on quarter,
predominantly driven by the challenging capital market
environment.”
Shayne Elliott, CFO, ANZ: “Looking at the second half,**
clearly income growth was less than we had hoped [due
to] the slowdown in the markets business in the last six
weeks of the year. That slowdown essentially halved the
revenue growth rate for the half.”
GS
114%
DB
34%
JPM
27%
BARC
–8%
LLD
UBS
C
HSBC
RBS
BAC
–44%
–68%
–76%
–88%
–92%
–97%
Lower legal costs were a positive feature of the quarter, with
many global banks reporting steep declines in charges for
Source: Company reports.
conduct-related issues. However, this may be a short-lived
tailwind, as the resolution and timing of investigations remain difficult to predict.
•
Tushar Morzaria, Group Finance Director, Barclays: “Conduct and litigation [costs are] at an elevated level; it’s very
hard for us to predict, as it is for anyone else. We’re quite conservative in our estimates, and we’re not really assuming
much of a drop-off at all and that it will carry on at the elevated levels that we’ve seen.”
•
John Cryan, co-CEO, Deutsche Bank: “Litigation is a difficult topic on which to give much information because you can
shoot yourself in the foot very effectively if you compromise your own position. We have built into the plan an amount
that we think, in reasonable circumstances, should cover the potential cost, but that’s largely for things we know about
and things we could reasonably expect. We are vulnerable to there being some unexpected and relatively significant
impacts.”
*Quarterly ROE not disclosed at ANZ, BBVA, Crédit Agricole, HSBC, Intesa Sanpaolo, Lloyds Banking Group, Macquarie Group, National
Australia Bank (NAB), Royal Bank of Scotland, Standard Chartered or UniCredit.
**30 September 2015, was the end of second-half and fiscal year 2015 for ANZ.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
5
Percentage change in net income from 3Q14*
200%
Higher profits and lower revenues
Higher profits and revenues
UBS
150%
Net income
100%
C
50%
JPM
RBS
BARC
0%
ING
STT
RBC
SG
BNP
TD
SANT
CIBC
ITAU
WFC, USB
AXP
CS
GS
CA
LLD
CBK
NOM
BK
INT
HSBC
UCG
MS
-50%
Higher revenues and lower profits
Lower profits and revenues
-100%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Revenues
Source: Company reports.
*Banks are not included for the following reasons: net loss in 3Q14 (Bank of America); net loss in 3Q15 (BBVA); net loss in both
periods (Deutsche Bank); ANZ, NAB, Macquarie Group and Standard Chartered do not disclose quarterly net income.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
6
2.
Macro-challenges: macro environment becomes difficult to manage
“We’ve had quite an exceptional quarter in terms of the market evolution. It’s really an exceptional
downturn; we have not seen such a movement on a quarterly basis over the last seven years.”
Carlos Torres, COO, BBVA
Global market instability was a significant headwind. During the
third quarter, macro challenges intensified on a number of fronts.
In July, uncertainty about the resolution of the Greek financial
crisis dominated headlines and influenced market sentiment. By
August, attention shifted to China, where government
interventions to calm the stock market, devalue the yuan and
lower benchmark interest rates triggered unprecedented volatility
in global stock markets. And, in September, the U.S. Federal
Reserve (the Fed) decided to postpone a long-anticipated interest
rate hike. These events combined with renewed concerns about
slowing global economic growth, falling commodity prices and
lingering low interest rates to create what Morgan Stanley CEO
James Gorman described as a “very unusual macro environment”
and Credit Suisse CEO Tidjane Thiam called “two very disturbed
months.”
While global banks’ investment banking operations bore the brunt
of the negative environment, particularly in the areas of fixed
income trading and equity underwriting, the macro challenges also
impacted asset management performance, contributed to ongoing
weakness in lending margins and, ultimately, helped keep the low
growth revenue environment fully in place.
Percentage change in trading revenues
from 3Q14, selected banks
UBS
–19%
DB
BNP
BARC
–2%
BAC
–4%
C
–16%
MS
–19%
NOM
–20%
HSBC
–22%
JPM
–23%
–6%
SG
–23%
GS
–33%
CS–42%
Equities
4%
37%
20%
21%
0%
12%
8%
31%
0%
19%
23%
9%
9%
12%
FICC
Source: Company reports
Impacts of macro-challenges
Retail banking
Wealth and asset
management
Equity
underwriting
•
Ralph Hamers, CEO, ING: “We’re already in a longer period of low interest rates, both on the
shorter end of the curve and the longer end of the curve. And that puts a bit of pressure on net
interest margin (NIM).”
•
Mike Pedersen, Group Head of US Banking, Toronto-Dominion: “I am happy with our
performance in the circumstances that we’re operating in. It’s difficult in terms of the low rates
and the fitful economic expansion.”
•
Brian Moynihan, CEO, Bank of America: “Our wealth management business is showing the
effects of lower market valuations pressuring revenue.”
•
Sergio Ermotti, CEO, UBS: “Transaction activity declined substantially as clients reacted to
extreme volatility.”
•
Harvey Schwartz, CFO, Goldman Sachs: “Equity underwriting revenues were $190 million. This
was down substantially compared to the second quarter due to a decrease of industry-wide
IPOs and secondary offerings as higher volatility and a decline in prices reduced activity.”
•
John Gerspach, CFO, Citigroup: “Equity underwriting revenues were down 43%, reflecting
lower industry-wide activity this quarter.”
•
Philippe Heim, CFO, Société Générale: “Fixed income revenues were down by 23%. We kept
good momentum in emerging countries on rates and products. We also had good volumes in
commodities. However, the structured products suffered from the previously described market
conditions and also the wait-and-see attitude we have seen among our clients.”
•
Iain Mackay, Group Finance Director, HSBC: “Global banking and markets revenue was down.
This was due to the impact of challenging market conditions on rates, which was down by 22%;
and credit, which was down by 51%.”
Sales and trading
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
7
3.
Expenses: efficiency deteriorates amid warnings that cost pressures will
persist in coming years
“More of the regulatory agenda [is] behind us than in front of us. But we still have a large regulatory
agenda, and trying to figure out when those costs abate is really challenging. We are very focused on
expenses. We’re trying to control those expenses that we can control.”
Jonathan Pruzan, CFO, Morgan Stanley
Cost–income ratios deteriorate across the industry. When compared to 3Q14, expenses rose at 18 of the 32 banks*
included in this analysis. In addition, efficiency ratios deteriorated at 20 banks over the same period. While expense
performance weakened in the quarter, most banks indicated that they have not relaxed what Intesa Sanpaolo CEO Carlo
Messina called a “sustained focus on cost.” Some banks are training their sights on generating positive jaws, or in other
words, growing revenues faster than expenses. Others are targeting specific expense run rates. Regardless of their
approach to costs, management at many banks acknowledged that significant headwinds to improved expense
performance exist in the near term. These include the low-growth revenue environment, costs to achieve new strategies
and restructuring initiatives, regulatory and compliance costs and, finally, ongoing investments in innovation and growth
programs.
•
Deutsche Bank CEO John Cryan unveiled plans to invest up to €3.5b in restructuring initiatives by 2018 to drive
annual savings of €1b to €1.5b. However, before the savings are realized, he warned: “We do not expect 2016 and
2017 to be strong years as we do expect them to be burdened by the cost of investments that we have to make and by
the cost of resolving many of our legacy and litigation and regulatory matters relating to misconduct.”
•
At UBS, CFO Tom Naratil provided a revised target for efficiency: “We expect our cost/income ratio to be around 65%
to 75% for the short to medium term, potentially above our target range, as we absorb regulatory costs and
macroeconomic headwinds.”
•
Credit Suisse CEO Tidjane Thiam pointed out the necessity of investing in the future: “We [will] invest to grow because
to be honest, there is cost-cutting fatigue [at this bank]. I’ve done hundreds of interviews since I joined. In every single
interview is, ‘Please, where are we going with this cost cutting? Is there a vision? Is there a direction?’ … My
commitment to them was I’m a growth person; I want to grow this company. Yes, we are going to take some pain, but
this is a growth budget.”
•
At Barclays, Group Finance Director Tushar Morzaria detailed the multiyear cost impact of structural reform: “[In
2016], the structural reform implementation costs are expected to rise to around £400m, as we ramp up in both the
UK and the US. The final costs of implementation are hard to estimate precisely, but our best estimate is around a
further £500m across 2017 and 2018, making a total of around £1b.”
•
Wells Fargo CFO John Shrewsberry observed: “Most of the savings [we generate get] absorbed by areas where we’re
changing or improving the firm; where we’re spending money on compliance, on risk management, on technology, on
innovation. So I’ve got some conviction that we’re not going to move below the higher end of our [efficiency ratio
target] range while we’re still in this lower-rate environment.”
3Q15
180.4
94.0
107.0
88.7
83.9
81.0
77.3
76.0
74.9
71.0
70.0
69.9
67.9
67.2
66.0
65.0
63.4
62.9
62.5
61.9
59.9
57.0
56.7
56.1
55.3
53.9
53.6
52.5
49.6
47.4
47.2
44.2
Cost-income ratios*
3Q14
Source: Company reports.
*Quarterly expenses and efficiency ratio not disclosed at ANZ, NAB or Macquarie Group.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
8
Percentage change in expenses and revenues from 3Q14
Lower revenues and lower costs
Higher revenues and higher costs
15%
ITAU
10%
ING
TD
BNP
NOM
5%
SG
AXP
STT
UCG
STAN
RBC
CBK
0%
JPM
LLD
RBS
CS
-5%
Expenses
CIBC
USB
GS
CA
WFC
INT
SANT
BARC
MS
BK
-10%
UBS
-15%
C
HSBC
-20%
-25%
-30%
BAC
Lower revenues and lower costs
-35%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
Higher revenues and lower costs
5.0%
10.0%
15.0%
20.0%
Revenues
Source: Company reports; Note: ANZ, Macquarie Group and NAB do not disclose quarterly data; Deutsche Bank
excluded because its expense increase of 80% made it difficult to read the rest of the chart; yellow markers
indicate that revenues grew faster than expenses.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
9
4.
Capital plans: how much capital is enough for European banks to resume
dividend payouts?
“Our commitment to our capital returns policy is unchanged and we will continue to target a payout
ratio of at least 50% of net profit, subject to maintaining a fully applied Basel III CET1 ratio of at
least 13% and 10% post-stress test.”
Sergio Ermotti, CFO, UBS
Wide range of dividend policies exists across the industry. For the most part, 3Q15 Common Equity Tier 1 (CET1)
ratios remained above regulatory requirements as they are currently understood. In addition, banks appeared to
demonstrate a sustained ability to generate capital, despite macro headwinds. As a result, banks in the US, Canada and
Australia highlighted plans to return excess capital to shareholders through dividends and share buyback programs. US
banks continued to execute the capital plans approved by the Fed in March 2015, while in Canada, CIBC and Royal Bank of
Canada announced dividend increases. In Australia, banks reiterated generous dividend payout targets; including 65% to
70% at ANZ, 70% to 75% at NAB and 60% to 80% at Macquarie Group.
In Europe, however, shareholders may have to wait a bit longer for some banks to improve dividend payouts. For example,
Deutsche Bank announced that it will not pay a dividend in 2015 or 2016 for the first time in almost six decades. And
while other banks appear poised to pay out excess capital, many continued to provide guidance that dividends will only
resume once banks have achieved internal targets for capital ratios that give them enough flexibility to meet potentially
higher regulatory requirements.
•
Tushar Morzaria, Group Finance Director, Barclays: “We are targeting getting [our CET1 ratio] over 12% over time, and
at that point, we can talk to you more about the dividend philosophy.”
•
Ewen Stevenson, CFO, Royal Bank of Scotland: “We’re still very much centered as a management team on returning to
capital distributions in early 2017. … We have to have a very good stress test result. We do expect this year to have
made progress. But we do expect it’s going to take us another year to have a very good stress test outcome, which we
think will be the trigger to allow us to make capital distributions off the back of 2016 full-year results.”
•
David Mathers, CFO, Credit Suisse: “We intend to recommend to our board and to our shareholders that we will pay out
at least 40% of the operating free capital generated as a cash dividend over the five-year period. Until we reach the
capital target, we will continue to recommend a CHF0.7 per share with a scrip* alternative.”
•
Stephan Engels, CFO, Commerzbank: “As I said, 20% is what we want to propose [for this year’s dividend], and I think
to start with, that is definitely an okay-ish dividend. With respect to the payout ratio, I think midterm is a little bit
further away than next year in general terms. … [The target for the] midterm [payout ratio] is 40%.”
•
Carlo Messina, CEO, Intesa Sanpaolo: “Our fully loaded CET1 ratio improved to 13.4%. So we are probably the only
bank in Europe that is ready to pay cash to its shareholders and not to ask for cash to its shareholders.”
12.4
12.4
12.7
13.1
13.2
13.2
13.4
13.4
13.5
13.7
14.3
RBS
NOM
AXP
ANZ
CA
INT
NAB
LLD
UBS
12.4
MS
11.8
ITAU
3Q15
USB
11.7
11.3
ING
GS
11.2
HSBC
11.1
STT
11.6
10.8
BARC
11.6
10.8
CBK
CIBC
MAC
10.8
11.5
10.7
BAC
C
10.7
BNP
WFC
DB
10.5
11.4
10.5
UCG
11.4
10.2
CS
SG
STAN
10.1
TD
Source: Company reports.
JPM
9.9
10.1
RBC
9.8
SANT
9.3
BK
BBVA
Common Equity Tier 1 (CET1) ratios,** 3Q15
2Q15
*With a scrip dividend, the bank issues new shares instead of paying a cash dividend.
**Fully loaded CET1 ratios with the following exceptions: “look-through” CET1 ratio at Credit Suisse and transitional CET1
ratios at American Express and Nomura.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
10
5.
Regulatory and compliance: banks expect capital burden to increase
when new rules are finalized
“I fully expect to have to deal with a continuing flow of people tinkering with the capital regime, be it
requirements, be it base calculation, be it composition of buffers. That isn’t going to stop.”
George Culmer, CFO, Lloyds Banking Group
Banks anticipate negative capital impacts from evolving regulations. Over the past several years, global banks have
adapted their business models to comply with Basel III CET1 and liquidity requirements, leverage ratio requirements at
both the global and national levels and various rules related to structural reform. But despite their efforts to date, much
remains to be done, especially as rules continue to take shape. During the 3Q15 earnings season, management
highlighted a renewed round of adjustment measures driven by leverage requirements and capital surcharges for global
systemically important banks (G-SIBs).
•
BNP Paribas issued Additional Tier 1 (AT1) capital in August 2015 to shore up its leverage ratio. CFO Lars Machenil
said: “[The leverage] ratio benefited from the AT1 issue of US$1.5b that we printed in August and from the continuing
reduction of the leverage exposure in our capital market activities.”
•
After being assigned to the 4.5% bucket under the Fed’s final rule on G-SIB capital surcharges, JPMorgan Chase moved
decisively during the quarter to cut non-operational deposits; the move resulted in a US$156b balance sheet reduction
from year-end 2014 levels and lowered its G-SIB buffer to 4%.
European banks are also carefully monitoring the package of rules that have been informally dubbed “Basel IV,” which
includes, among other things, the fundamental review of the trading book (FRTB) and internal model reviews. The table
below details several banks’ preliminary views on how they will mitigate Basel IV-related impacts. Notably, this was not a
topic of concern for banks in the US, Canada or Australia.
Evolving capital requirements
Bill Winters,
CEO,
Standard
Chartered
•
“We don’t know what’s going to come out of what’s being called Basel IV. We don’t know the degree
to which standardized floors are going to be implemented or applied to business mixes like ours.
We’re expecting that it will be adverse in terms of requiring some incremental capital. … We have
undertaken, and will continue to undertake, a number of steps to rationalize our group structure,
with a view to reducing that capital and liquidity drag.”
John Cryan,
co-CEO,
Deutsche
Bank
•
“First, following a series of quantitative impact surveys related to the fundamental review of the
trading book, we now have more insight into the proposed changes to capital charges for market
risks, which frankly without active remediation would render our trading books unaffordable.
Second, we now expect there to be risk floor introduced into our credit risk models that
substantially increases the amount of capital we need to hold against a given exposure.”
•
“We have basically three years to adapt; knowing that, it seems to me that there is a slight shift of
the regulators on emphasizing the need to have a banking sector that is able to finance the
economy and not to have a second wave of additional capital requirements.”
Federico
Ghizzoni,
CEO,
Unicredit
•
“We are already working on some mitigation. … It’s clear that now, without even waiting for new
rules to come, we are readdressing businesses. For example, if we think about medium-term loans,
it is clear that a bullet cannot be provided anymore, unless on an exceptional basis, to avoid the
impact from IFRS 9. It’s a small example of things that we are trying to do to anticipate some of
the negative effect that may come from the so-called Basel IV implementation.”
David
Mathers,
CFO, Credit
Suisse
•
“The FRTB changes impact a number of aspects of our fixed income business, especially long
dated derivatives … these positions have been prioritized in our plans and will be transferred to the
new Strategic Resolution Unit for wind down prior to imposition of the FRTB rules.”
Frédéric
Oudéa, CEO,
Société
Générale
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
11
6.
Cross-border: slower GDP growth forecast does not deter commitment
to Asia-Pacific
“In Asia, we’re continuing to increase our institutional and corporate market share, with further growth
in key Asian markets. We’ve now completed our footprint in the region, with the opening of branches in
Thailand and Myanmar this year.”
Mike Smith, CEO, ANZ
Asia-Pacific (APAC) remains a key strategic priority for many banks. Concerns about the strength of the Chinese
economy dominated headlines during the third quarter and were a key factor in the October downgrade of global gross
domestic product (GDP) forecasts by the International Monetary Fund (IMF). Many of the world’s largest banks, however,
have a large presence in China and the Asia-Pacific region and are counting on these operations to drive revenues and
earnings in coming years. Despite the pessimistic economic growth outlook, management at several of these banks noted
that the potential for short-term impacts does not alter their long-term expectations and plans for the region.
•
John Gerspach, CFO, Citigroup: “The IMF has lowered their growth forecast [for Asia], but they are still forecasting
growth. And when you take a look at our Asia consumer revenues, we believe that they will stabilize. They are
stabilizing now, and they should stabilize going into the fourth quarter and then into next year, so I don’t think that
those two things are inconsistent. I’d like to get more growth out of Asia but with everybody living in a lower GDP
environment, getting high levels of growth is going to be difficult.”
•
Tom Naratil, CFO, UBS: “It’s important to separate comments that we might have about short-term fluctuations in
markets or in client sentiment in APAC versus our long-term bullish view of the region for wealth management.
Certainly, if you follow a quarter like the one that we saw, and our outlook statement reflects this, clients do have
caution on their minds. However, as we look out in any of our planning, one of the reasons why we’ve been able to
develop the number one wealth management business in the region is the fact that we’ve been consistent in our
commitment over five decades.”
•
Bill Winters, CEO, Standard Chartered: “Do we believe that the opportunity in Asia has gone away as a result of the
current period of adjustment in China, ASEAN, South Asia, Middle East, Africa; falling commodity prices; slower export
growth; sluggish economy from the West? Absolutely not. And at the core of our thesis for the bank is that we believe,
in the medium to long term, [positive] trends are embedded and we will benefit by them. That said, we have to run our
business between now and the time that these trends make themselves clear again.”
•
Stuart Gulliver, Group CEO, HSBC: “Good progress has been made in targeting growth in Asia. In the Pearl River Delta,
we continued to recruit staff to capture growth. We’re also announcing today that we signed an agreement, which is
subject to regulatory approval, to establish a majority-owned joint venture securities company in Jinhai, Zhengzhou. If
approved, this will be the first majority foreign-owned securities company in mainland China and will potentially allow
us to engage in the full spectrum of securities business in the country.”
GDP growth rates and forecasts
12
10
8
6
4
2
0
-2
-4
-6
2008
2009
2010
2011
United States
2012
World
2013
2014
2015
European Union
2016
2017
2018
Sub-Saharan Africa
2019
2020
China
Source: IMF World Economic Outlook Database.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
12
7.
Lending: growth trends take hold, although margin compression remains
in place
“The gradual pickup in loan demand across the Eurozone continued in the third quarter as portrayed by
the 1.7% loan growth of our domestic markets. We actually saw growth in all geographies, driven by
Belgian retail and by our specialized businesses.”
Lars Machenil, CFO, BNP Paribas
Positive lending trends appear to be solidifying and sustainable. Loan growth rates hovered in the single digits for most
of the banks that reported year-over-year increases in lending, reflecting slow — although still positive — economic growth
in a number of countries. Notably, all five of the UK-based banks included in this analysis reported a decline in end-ofperiod loan balances, driven by progress in running off non-core portfolios.
Even at low rates, loans grew consistently, prompting management at a number of banks to comment on the profitability
of different lending categories. Some banks appeared to signal an enhanced focus on driving growth in high-margin
segments to improve the profit performance of their lending businesses. Others, such as Wells Fargo, remained more
interested in growing customer relationships and core deposits, as they seek to drive net interest income, as opposed to
margins.
•
Ralph Hamers, CEO, ING: “When we launched the [Think Forward] strategy, we indicated that we wanted to further
diversify the balance sheet away from mortgages into other asset categories and preferably through our own asset
generating capabilities, and we have made steady progress on that. So you see that, specifically in the challengers and
growth markets, we are creating more sustainable balance sheets but diversifying away from mortgages into other
higher yielding assets. And that is predominantly now through the growth of our commercial banking business in these
countries, but also our SME and consumer finance.”
•
Mike Pedersen, Group Head of US Banking, Toronto-Dominion: “The margin did decline a bit more than we expected
this quarter, but mostly because we grew faster than we expected, especially in larger commercial loans and in superprime auto lending. In this environment, with origination margins lower than portfolio margins, if you’re outgrowing
the market in lending, you’re subject to more margin pressure, but it’s still good net interest income business.”
•
Jérôme Grivet, CFO, Crédit Agricole: “We are in a profound mutation of the [retail] business. So, of course, the net
interest margin is under pressure and will probably remain so for coming quarters. … We have a very high level of
either renegotiation or repayment of loans, and we are replacing all loans with new loans bearing lower interest rates.”
•
António Horta-Osório, Group CEO, Lloyds Banking Group: “The [mortgage] market is growing less than we thought,
around 1.5%. … We are growing around 1%, so less than the market, because as I also said, in the context of the NIM,
we think that is absolutely the right thing to do in a low growth environment which is competitive; we should preserve
NIM. And if the price for that is to grow slightly below the market, we think that’s exactly the right trade-off.”
Percentage change in end-of-period loan balances from 3Q14
24%
23%23%
19%
18%
13%
9% 9% 10%
7% 8% 8% 8% 8% 9%
5% 6%
4%
4%
4%
4%
3%
1% 1% 2%
–8%
–10%–9%
–4%
–1% 0%
–21%
Source: Company reports; loan data not available for BNY Mellon, Goldman Sachs or State Street.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
13
8.
Innovation: investments in digital become compulsory
“We’ve been heavily investing in technology for the past five or six years. We’re focused on leveraging
these investments to drive further efficiencies, deliver a differentiated experience and generally make
it easier for our clients and employees to do business with us.”
Dave McKay, CEO, Royal Bank of Canada
Digital investments are non-negotiable, even in a low revenue growth environment. Banks are closely watching
discretionary spending in the current low revenue growth environment. However, digital investments are now considered
to be as compulsory as regulatory compliance spending is. This was not the case even just a few years ago, when digital
might have been considered a luxury, as opposed to a necessity, but no longer. Banks urgently need to invest in digital to
streamline their operations, eliminate duplicative processes and drive efficiency improvements. At the same time, digital
initiatives are expected to improve customer satisfaction, which will presumably increase retention, cross-selling
opportunities and, ultimately, profitability.
•
Shayne Elliott, CFO, ANZ: “Clearly in a lower growth environment, it’s easier to cut back on investments in strategic
initiatives. We have maintained our investment here; [prioritizing] digitization of the customer experience, greater
productivity and streamlining. We would expect those investments to continue and potentially increase in the future.”
•
Federico Ghizzoni, CEO, Unicredit: ”Our digital journey is not just a nice project to come. It’s something that is already
ongoing, something that has seen very strong acceleration in the last 12 months. It is expected to be further enhanced
thanks to our €1.2 billion investment program for the next three years. The €1.2 billion is not an additional investment
but just a shift from investments considered less of a priority than digital.”
Over the past couple of years, comments on digital initiatives during earnings calls have evolved from reporting on mobile
banking applications and the number of active mobile users to increasingly innovative applications of digital technologies.
Innovative digital initiatives discussed in 3Q15
Ralph
Hamers,
CEO, ING
Gerald
Hassell, CEO,
BNY Mellon
•
“In October, we launched a strategic partnership with Kabbage, a leading US-based technology
platform that provides automated lending to SMEs. ING and Kabbage together will soon be
launching a pilot project in Spain to provide loans to small businesses. … The goal of the pilot in
Spain is to learn more about better ways to serve small businesses with lending capacity, and
clearly we’re excited to bring this technology to our customers here in Europe.”
•
We’ve created what we call MyDashboard, which improves employee productivity as part of our
digitization strategy. The MyDashboard provides our managers with a convenient snapshot of key
data on their employees, such as expenses, performance measurement status, training and other
key metrics. The capability was recently named best new digital project for financial services as
part of the Gartner Financial Services Cool Business Awards.”
•
“In addition to developing in-house, industry-leading mobile banking apps for smartphones and
tablets, we’ll also enter into strategic partnerships where appropriate. In April, we announced our
strategic alliance with MaRS Discovery District, and this allowed us to be the first Canadian bank to
allow a banking app for the Apple Watch. We’re also the first Canadian bank to enter into a
strategic partnership with suretap, a mobile wallet offered by some of Canada’s leading wireless
carriers for Android and BlackBerry devices.”
•
“We successfully launched the digital private bank in Singapore, but we’ve also identified a number
of digital opportunities through our global innovation lab, and that will contribute both to our
improved client service but also to increased efficiency.”
•
“I would finally highlight the open platform project, which has lots of potential to add additional
business. It’s really about connecting our new state-of-the-art banking platform that you know we
invested heavily in the past, and that is really a competitive advantage to provide services to third
parties leveraging that platform. We have connected with Dwolla and are now in the process of
connecting with Simple Bank, and that will be the start of that open platform strategy.
Victor Dodig,
CEO, CIBC
David
Mathers,
CFO, Credit
Suisse
Carlos
Torres, CFO,
BBVA
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
14
9.
Credit quality: macro uncertainties prompt heightened monitoring of
selected portfolios
“The cost of risk [in Global Banking and Investor Solutions] was below the average over the cycle, but it’s
slightly up. And this is partly linked to the oil and gas exposure. … We have a very careful provisioning
policy on that sector.”
Didier Valet, Head of Corporate and Investment Banking, Société Générale
Overall, credit quality remains strong, although pockets of concern have emerged. While expectations for GDP growth
have moderated, most regions are still growing, albeit at slower rates. This provides a supportive backdrop for continued
credit quality improvements, and in general, trends remain strong across most portfolios and metrics. However, banks are
prudently monitoring certain exposures for signs of deterioration in response to falling commodity prices and sharperthan-expected declines in GDP in certain emerging market economies.
•
Tom Naratil, Group CFO, UBS: “Notwithstanding the continued low levels of credit loss expenses, we’re closely
monitoring developments in the Swiss economy, where we remain mindful that the continued strength in the Swiss
franc could have a negative effect on the economy
Basis point change in nonperforming loan (NPL) ratio* from
and exporters in particular, which may impact
3Q14, selected banks
some of the counterparties in our domestic
lending portfolio.”
•
Wilfred Nagel, Chief Risk Officer, ING: “On the risk
costs, what we’re seeing is the typical pattern at
the end of a recession. On one hand, new
provisions are lower; on the other hand, the old
problem loans get resolved one way or the other,
and that means both write-offs and releases go up,
which then leads to a lower net addition to the
provisions. It’s therefore likely that 2015 is going
to be below 2014 by a more considerable margin
than we had earlier guided on. At the same time, I
would caution that uncertainty does remain.
... You still have a lot of uncertainty around
Ukraine, Russia and the energy market. So there is
plenty of scope for some noise in these numbers.”
–240
–2
–3
–5
–14
–17
–19
–20
–20
–30
–30
–42
–48
–50
10
2
ITAU
TD
RBC
CIBC
ANZ
C
USB
JPM
CA
ING
BNP
WFC
BAC
NAB
BBVA
LLD
RBS
•
–290
Iain Mackay, Group Finance Director, HSBC: “When
you look across overall asset quality in the main
Source: Company reports; *metrics include NPL ratio, net impaired
regions in which we operate, the quality remains
loan ratio, non-accrual loans/total loans.
very stable. There is in this environment, as you’d
expect, a heightened scrutiny and review of
assets. … But what we’ve moved to watch-and-worry lists within the quarter has remained fairly stable.”
•
José Antonio Álvarez, CEO, Santander: “On credit quality, we don’t see any particular concern or problem [across] all
the geographies. I would refer specifically to Brazil, where given the economic situation you see non-performing loans
going up [slightly]. … We expect some head winds [in Brazil due to the] economic situation, but as we said to you at the
Investor Day, the cost of credit is going to go up, but not significantly.”
•
Jérôme Grivet, CFO, Crédit Agricole: “In oil and gas, what I can say is that, for the time being, we haven’t seen any
major or significant individual [exposure] that deserves a specific provision. So again, we are managing the quality of
the portfolio like we always have, to be frank, which is to concentrate on the best-of-class customers.”
•
John Shrewsberry, CFO, Wells Fargo: “We believe the energy services sector will incur greater challenges in the near
term as it adjusts to lower commodity prices, and this view is reflected in our reserving process.”
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
15
10. Acquisitions and divestments: European banks continue to reshape
through business exits and asset sales
“We made further progress this quarter on business sales, derivative unwinds, and sales of securities and
loans. We completed the sale of the UK secured lending business. And as you know, we announced the
sale of our Portuguese retail business.”
Tushar Morzaria, Group Finance Director, Barclays
European banks continue to dispose of legacy assets. Based on management comments during the 3Q15 earnings
season, asset sales in North America appeared to be winding down, with only a few banks discussing exits that occurred
during the quarter. In contrast, European and Australian banks
Asset sales, 3Q15
were much more active in this area, partially reflecting high-
profile strategic announcements by Credit Suisse, Deutsche Bank
and Standard Chartered, as well as NAB’s efforts to refocus on its
domestic business.
•
•
•
•
Credit Suisse struck an exclusive deal with Wells Fargo
allowing it to recruit advisors from its US Private Banking
business, which is being sold as part of new CEO Tidjane
Thiam’s strategic overhaul: “Please don’t think that because
we sold the private bank we have in the US, that we have lost
interest in the US. … We are interested in it. We have a
credible strategy to get a share of that, and we will.”
Deutsche Bank announced that it would exit onshore
operations in 10 countries, launch an IPO of Postbank and
close 200 German branches. When asked which assets would
be disposed, CFO Marcus Schenk said, “We would prefer to
tackle these without [an announcement], and we will let you
know when we’ve sold something. That’s the target. Now
whether that always works or whether things leak out earlier,
I think it’s better — in particular when you sell in the context
of an M&A transaction — to tell the market when you’ve done
it and not when you plan to do something.”
At NAB, Group Executive of Finance and Strategy Craig
Drummond provided details on the “significant repositioning”
the firm has undertaken: “We are announcing a 20-year
partnership today and a sale of 80% of our life insurance
business to Nippon Life. … In relation to the Clydesdale Bank
IPO, we are very well progressed on that IPO. … The Great
Western Bancorp sale was finalized in August. … In relation to
UK CRE, as you will recall we did a £1.2 billion transaction in
the first half.”
Standard Chartered Group CEO Bill Winters talked through
his strategic plan for the bank and provided the following
details on business repositioning: “In terms of peripheral
businesses, we’ve either sold, primarily sold and in a couple
of cases closed, over 20 businesses year to date. We have an
ongoing set of relatively small sales or closures, but we’re
prepared to take the difficult steps. We have closed some
important businesses that we didn’t think could be completed
safely and soundly on an economic basis, including our SME
business in the Middle East, in the UAE in particular. And
finally, we’ve got $5 billion of peripheral businesses, or
subscale businesses, that we intend to exit.”
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
ANZ
•
Esanda dealer finance (closed)
•
UK secured lending business
(completed)
•
Portuguese retail business (closing
1Q16)
•
Germany-based boutique, Meriten
(closed)
•
US$31b of previously announced
asset sales including Japanese retail
and cards businesses and OneMain
Financial (closing 4Q15)
•
CRE portfolio (closed)
•
Ship restructuring platform in Ship
Finance (closed)
HSBC
•
Brazil business (deal remains on
track)
RBS
•
16% stake in Citizens Bank (20.9%
stake remaining)
SANT
•
Stake in Banco Caixa Geral Totta de
Angola (closed)
•
Austrian retail activities (announced)
•
Italian leasing business (announced)
BARC
BK
C
CBK
UCG
16
Appendix
Key themes addressed, by bank
#
ANZ
AXP
ITAU
SANT
BAC
BK
BARC
BNP
CIBC
C
CBK
CA
CS
DB
GS
BBVA
HSBC
2Q15 earnings season
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Expense trends
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Capital strength
and plans
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Regulation and
compliance
34
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Cross-border and
location
strategies
33
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Lending trends
31
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
30
√
√
√
√
√
√
√
√
√
√
√
Credit quality
trends
29
√
√
√
√
√
√
√
Acquisitions and
divestments
27
√
√
√
√
√
√
√
Key theme
Quarterly
earnings
performance
Macro-challenges
Innovation
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Legend
ANZ — Australia and New
Zealand Banking Corp.
AXP — American Express
ITAU — Banco Itaú
SANT — Banco Santander
BAC — Bank of America
BK — BNY Mellon
BARC — Barclays
BNP — BNP Paribas
CIBC — Canadian Imperial
Bank of Commerce
C — Citigroup
CBK — Commerzbank
CA — Crédit Agricole
CS — Credit Suisse
DB — Deutsche Bank
GS — Goldman Sachs
BBVA — Grupo BBVA
HSBC — HSBC Holdings
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
17
Key themes addressed, by bank (contd)
#
ING
INT
JPM
LLD
MAC
MS
NAB
NOM
RBC
RBS
SG
STAN
STT
TD
UBS
UCG
USB
WFC
2Q15 earnings season
Quarterly
earnings
performance
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Macrochallenges
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Expense trends
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Capital
strength and
plans
35
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Regulation and
compliance
34
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Cross-border
and location
strategies
33
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Lending trends
31
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
30
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Credit quality
trends
29
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Acquisitions
and
divestments
27
√
√
√
√
√
√
√
√
√
√
√
√
Key theme
Innovation
√
√
√
√
Legend
ING — ING Groep
INT — Intesa Sanpaolo
JPM — JPMorgan Chase
LLD — Lloyds Banking
Group
MAC — Macquarie Group
MS — Morgan Stanley
NAB — National Australia
Bank
NOM — Nomura Holdings
RBC — Royal Bank of Canada
RBS — Royal Bank of
Scotland
SG — Société Générale
STAN — Standard Chartered
STT — State Street
TD — Toronto-Dominion
UBS — UBS Group
UCG — UniCredit Group
USB — U.S. Bancorp
WFC — Wells Fargo
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
18
Select KPIs
KPIs
49.6%
50.4%
6.3%
5.5%
34.2%
-5.1%
38.7%
Worst
performer
-16.2%
22.6%
30.1%
30.9
111.8
102%
-1.7%
1.0%
25.5%
-33.3%
-25.9%
-30.5%
Average
1.5%
0.9%
0.1%
75.6
54.1
70.6%
29.4%
2.3%
10.6%
8.5%
-12.4%
-4.8%
AXP
0.2%
-6.0%
5.8%
NA
NA
76.3%
23.7%
6.3%
8.7%
23.4%
-5.4%
-15.2%
20.6%
22.6%
20.8%
30.9
28.2
91.2%
8.8%
2.7%
10.7%
-6.5%
-15.4%
-15.1%
STD
6.4%
5.6%
-12.4%
62.2
31.0
49.9%
50.1%
2.6%
10.5%
7.9%
-25.9%
-30.5%
BAC
1.4%
-2.6%
-14.7%
96.1
63.4
66.0%
34.0%
2.1%
9.4%
7.1%
-9.5%
-9.0%
BK
-2.3%
-2.7%
-11.2%
73.9
52.4
70.9%
29.1%
1.0%
14.5%
8.5%
-7.2%
1.5%
BARC
-9.5%
-4.4%
30.1%
NA
NA
67.6%
32.4%
4.2%
8.4%
3.9%
-8.4%
6.4%
BNP
3.7%
NA
NA
61.2
41.2
67.2%
32.8%
NA
11.6%
7.8%
-5.3%
6.2%
CIBC
12.9%
4.7%
9.2%
63.3
39.2
61.9%
38.1%
2.0%
5.5%
19.1%
-5.1%
-5.2%
C
-3.9%
-13.0%
-19.1%
79.3
46.8
59.0%
41.0%
3.0%
10.0%
7.8%
-10.9%
-5.6%
CBK
-5.5%
0.9%
4.1%
49.7
38.0
76.4%
23.6%
1.0%
9.0%
3.2%
-19.9%
-13.2%
CA
-3.5%
NA
NA
NA
NA
69.9%
30.1%
NA
10.6%
7.2%
-25.0%
-8.8%
CS
-10.1%
-8.7%
2.9%
120.1
99.3
82.7%
17.3%
1.1%
10.6%
6.9%
-11.5%
-11.1%
DB
0.6%
3.7%
2.7%
81.5
82.9
102%
-1.7%
1.0%
9.6%
-33.3%
-14.9%
-8.5%
GS
1.3%
-16.1%
8.0%
NA
NA
70.2%
29.8%
NA
9.1%
6.5%
-17.2%
-6.9%
HSBC
-6.6%
NA
NA
60.7
34.8
57.3%
42.7%
NA
9.4%
10.8%
-12.6%
-21.4%
ING
3.1%
NA
NA
NA
NA
56.1%
43.9%
NA
NA
10.8%
NA
NA
INT
5.4%
NA
NA
51.1
25.3
49.6%
50.4%
NA
10.4%
6.2%
-5.6%
38.7%
ITAU
15.2%
21.4%
7.8%
64.2
47.4
73.9%
26.1%
NA
25.5%
34.2%
-14.1%
-16.3%
JPM
-4.3%
-6.5%
3.5%
96.7
65.7
68.0%
32.0%
2.2%
12.9%
11.2%
-10.4%
0.9%
LLD
-4.5%
NA
NA
NA
NA
74.2%
25.8%
1.6%
7.6%
5.7%
-13.5%
-0.2%
MS
2.4%
-18.4%
15.5%
138.0
111.8
81.0%
19.0%
NA
8.5%
5.5%
-20.0%
-8.7%
NOM
0.4%
6.3%
5.0%
NA
NA
94.1%
5.9%
NA
17.2%
6.9%
-19.0%
10.7%
RBC
18.7%
0.9%
-11.3%
95.0
56.9
59.9%
40.1%
1.7%
5.8%
16.5%
-8.4%
-8.9%
RBS
-16.2%
7.7%
-15.5%
53.4
53.5
100%
-0.3%
2.1%
10.3%
7.3%
-13.2%
-14.0%
SG
4.7%
NA
NA
47.8
29.9
62.5%
37.5%
NA
11.0%
8.2%
-7.3%
3.5%
STT
-10.0%
10.3%
-2.0%
82.2
61.3
74.5%
25.5%
1.0%
11.2%
10.9%
-13.2%
-6.6%
TD
17.0%
5.1%
-0.3%
78.6
47.6
60.6%
39.4%
2.0%
6.0%
14.2%
-10.1%
-2.8%
USB
6.3%
9.3%
2.7%
NA
NA
56.0%
44.0%
3.0%
13.0%
13.2%
-7.1%
-0.7%
UBS
-6.2%
2.7%
-31.2%
124.2
110.1
88.7%
11.3%
NA
10.5%
15.2%
-14.9%
3.9%
UCG
2.1%
-2.4%
0.6%
46.8
29.7
63.4%
36.6%
NA
9.5%
4.4%
-10.6%
-6.5%
WFC
7.0%
1.2%
1.3%
82.5
46.8
56.7%
43.3%
3.0%
11.2%
12.4%
-9.8%
-1.5%
BBVA
One-year
change
Three- month
change
25.3
Return on
average equity
138.0
Cost of equity
-31.2%
Net interest
margin
-18.4%
Operating
margin
20.6%
Cost-income
ratio
Non-comp cost
Best
performer
Revenues/
employee
(US$000)
Text legend:
Better than
average
Worse than
average
Comp cost
Share price
Asset
Cost/employee
(US$000)
Operational metrics
(% Y-o-Y growth)
Source: SNL Financial. Notes: 3Q15 numbers for Canadian banks are from May–July 2015; operating margin = (net revenue-operating
exp.)/net revenue; all numbers are non-annualized (except RoAE and NIM).
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
19
Scope, limitations and methodology of the review
The purpose of this review is to examine the key themes discussed among 35 global institutions operating within the
banking and capital markets sector during the 3Q15 earnings reporting season.
The identification of the top 10 themes is based solely on an examination of the transcripts and associated presentation
materials of the earnings conference calls held from 26 August 2015 to 11 November 2015.
The period covered is 3Q15, which ended 30 September 2015. Exceptions include the following:
•
Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC) and Toronto-Dominion Bank, for which
the 3Q15 period ended 31 July 2015
•
Nomura Holdings, Inc., for which the covered period was 2Q16
•
Macquarie Group Limited, for which the covered period was 1H16
•
Australia and New Zealand Banking Group Limited (ANZ) and National Australia Bank (NAB), for which the covered
period was 2H/FY15
Banks were selected based on their size and the availability of earnings conference call transcripts. Every effort was made
to include a global sample of banks in the review. Exceptions include the following:
•
Mitsubishi UFJ Financial Group, Inc.; Mizuho Financial Group, Inc.; and Sumitomo Mitsui Financial Group, Inc. were
excluded from the analysis because of the lack of transcript availability.
•
Bank of China Limited and Industrial and Commercial Bank of China Ltd. were excluded because of the timing of their
3Q15 results reporting.
Global Banking & Capital Markets: key
themes from 3Q15 earnings calls
20
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About EY Global Banking & Capital Markets
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managing risk effectively while satisfying an array of divergent
stakeholders is a key goal of banks and securities firms. Global
Banking & Capital Markets brings together a worldwide team of
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experience in providing assurance, tax, transaction and advisory
services. We work to anticipate market trends, identify the
implications and develop points of view on relevant sector issues.
Ultimately it enables us to help you meet your goals and compete
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