Key themes from Q4 2015 earnings calls
Escalating concerns about the trajectory of global economic growth raise questions about the banking industry’s outlook for 2016.
Over the course of 2015, the operating backdrop for the global banking industry changed dramatically. The constructive conditions that characterized most of the first half of the year dissipated over the summer months and were replaced by persistent concerns about falling oil prices, stock market instability and indications that economic growth in China and other emerging markets (EM) was slowing.
Not surprisingly, banks’ results reflected the macro challenges and in 2015 return on equity (ROE) fell at nearly half the banks included in this analysis when compared to 2014. In addition, revenue growth was anemic and expenses stayed stubbornly high.
And, while many banks offered evidence that they have meaningfully de-risked their balance sheets and significantly improved their solvency, the key question at the start of 2016 remains: What will drive future growth? During the fourth quarter earnings season, it was apparent that there are no easy answers for this question, particularly given the outlook.
As observed by Citigroup CEO Mike Corbat: “The early days of 2016 have shown that the environment hasn’t gotten and isn’t likely to get any less challenging.”
Top 10 themes: a quarter-over-quarter comparison
*Note: Please see Appendix for an explanation of the ranking methodology.