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K e y t o p i c s
I. State of the banking industry
- Global top 100 banks increased their market capitalization by +6.5% and achieved the second highest TSR performance among all industry sectors (+9.9%) in Q3 2016
- European banking sector with strong quarter-over-quarter performance (+15%) after a weak first half of 2016—several large European institutions still with disastrous P/B ratios far below 1.0x
II. Economic environment and key banking drivers
- Economic environment for Western Europe still mainly influenced by economic uncertainty due to Brexit vote as well as persistent structural problems of the European banking sector
- ECB’s expansive monetary policy pushed down the long end of the European money and capital market rates
- Profitability of global and European banks improved in Q2 2016, but with huge differences across the sector
III. Special topic: analysis of the ECB’s asset purchasing program
- Between October 2014 and September 2016, the ECB purchased a total of EUR 1.29 tr of marketable assets leading to an increase in its balance sheet by +63% to over EUR 3.3 tr
- Decreasing yields, lower market liquidity as well as negative impacts on the banking sector are becoming more and more observable
