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zeb/market flash (Issue 9 – April 2014)

By Dr. Dirk Holländer, Volker Abel, Dr. Ekkehardt Bauer

08/04/2014
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zeb.market.flash provides an overview of the performance of the world’s largest banks (measured by market capitalisation). The relevant factors are briefly and concisely described, analysed and classified by our experts. For our analyses, we take a close look at relevant indicators for the valuation of the capital market, such as stock returns, as well as macroeconomic and bank-specific drivers. This issue (Q1 2014) deals with the Low interest rates and changing regulations –consequences of the double burden for banking stability in Europe.

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)

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

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

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

Picture: Skyline Shanghai