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zeb/market flash (Issue 8 – January 2014)

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 (Q4 2013) deals with the Low interest rates and changing regulations –consequences of the double burden for banking stability in Europe.

State of the banking industry

US and Western European banks continue their strong TSR performance in Q4 2013 with 12.0% and 6.6% respectively leaving BRICS banks with negative performance far behind
Valuation of BRICS financial institutions further decreased and is now below valuation of US banks for the first time

Key banking drivers

Economic conditions further improved in mature markets, especially in the US with a GDP growth rate of 3.6% in Q3 2013 – emerging markets still at high level with negative trend regarding GDP growth
Long-term interest rates in the US and Germany continued to increase resulting in steeper yield curves – yield curve for BRICS remains flat

Special topic: Low interest rates and changing regulations –consequences of the double burden for banking stability in Europe

Double burden of low interest rate and regulation will have massive effect on profitability and the capitalization at European banks
Holistic actions required to overcome challenging situation