Key themes from the 3Q 2016 earnings calls

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Earnings trends diverge across regions and business models.

In 3Q 2016, the macroeconomic environment was relatively settled, with fewer instances of extreme market turbulence, oil prices recovering to the US$50 per barrel range and no major downgrades to global economic growth.

However, as Goldman Sachs CFO Harvey Schwartz noted, stable conditions did not necessarily translate into a robust backdrop. “You could certainly envision an environment that was significantly better than where we are today,” he said. “You've heard me say this a lot, but we root for growth. And an environment of negative interest rates in vast parts of the world is not indicative of a world that is growing at a great pace. So you can see much better environments than we have today, and we hope that ends up being the case.”

Given this context, there was little uniformity in global banks’ results. North American banks delivered generally positive earnings reports, driven by revenue growth. Most banks in the region defied the seasonal revenue weakness that is typically expected in the third quarter of the year and reported strong performance in both FICC trading and net interest income.

Elsewhere, disappointing headlines outside the Americas included:

  • HSBC took a US$1.7b charge related to the disposal of its Brazil business.
  • Barclays and Lloyds Banking Group set aside additional provisions for payment protection insurance (PPI) claims.
  • Royal Bank of Scotland and UBS added to their litigation provisions.
  • Restructuring was a drag on performance at a number of banks, including BNP Paribas, Commerzbank, Standard Chartered and UBS.

Looking ahead, management across all regions remain wary about revenue prospects and, in some cases, about the outlook for further improvements to the operating environment. Many expect geopolitical developments, such as the US presidential election and the UK referendum on leaving the EU, to affect economies and markets, although the extent and timing of potential impacts remains unclear.

For more information about 3Q 2016 earnings calls and the top 10 themes, download the full report.

EY - Top 10 themes: year-over-year comparison