TheChek News Flow

… banks have lost 25% in Europe, 19% in the US and 15% in Asia. Negative sentiment has overshadowed earnings releases. Understandably, when financial stability questions are being asked, quarterly performance barely matters.

… with €1.7 bn of aggregate profits. Results were “noisy” and one-offs (litigation, restructuring, equity stake and goodwill impairments) made the difference between a solid top-line (and PPP) and a miss at the bottom line. Still, for the banks’ reporting thus far, capital was up 20bp (rising to 11.9% CET1).

Nordic banks (+4%-9% on results day) had decent results, and the domestic Spanish banks outperformed low benchmarks (+2%-12%). Of the large cap banks, the French / Dutch national champions reported strong numbers, and Spanish / Italian mixed.

4Q was a challenging quarter for the European IBs reporting thus far – especially for CS and DBK. FICC revenues were down sharply (yoy: -60% for CS, -17% for DBK) underperforming the US peer group. Capital generation was positive at UBS (+20bp), but negative at DBK (-40bp) and CS (proforma capital missed consensus by -80bp).

Outlook for 1Q16 was subdued.

Amongst the European banks, our CL-Buy stocks fall into two categories: (1) “self-help” potential aided by a clearer regulatory outlook (BNP, BARC, CS), and (2) restructuring of the Euro area banking sector, especially amongst smaller Italian banks (BPER). On this point we expect the recent market turmoil to add to policy makers’ sense of urgency. Amongst banks reporting thus far, we find BNP to have had the more encouraging 4Q15 performance. In a European sector-relative context, we see BNP as offering positive capital formation, low and falling NPL ratios, strategic optionality and cash dividend. We make changes to our PTs and estimates for a number of banks in our coverage.