KEY TOPICS
1. State of the banking industry
- Global capital markets were massively distressed during the first quarter of 2016—significant loss of
market cap. (global top 100 banks: -12.1%), decline in P/B ratios of around 9% on average and the
lowest TSR performance of all industry sectors - Among global top 100 banks, especially shareholders of Western European banks had a very rough
quarter losing 15.2% on average
2. Economic environment and key banking drivers
- Worsening economic figures for China and the ECB’s decision to further expand its ultra-loose
monetary policy (rate on main refinancing operations reduced by 5bp to 0.0%, new series of targeted
longer-term refinancing operations, TLTRO II) dominated the economic environment in Q1 2016 - Business climate deteriorated again with figures declining for at least the third consecutive month
- In Q1 2016, Western European banks once again reported massive bottom line issues for the second
half of 2015—full year post-tax return on equity of just 6.0%
3. Special topic: Sell-off in European banking industry—fundamental reasons or exaggerated fear?
- Negative TSR performance goes along with a significant reduction in the profitability outlook for
respective banks - Pessimistic profitability outlook combined with bad news from the Chinese economy created toxic
sentiment leading to a strong reaction in the capital market
Picture: Skyline New York
