zeb/market flash (Issue 8 – January 2014)

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