Key themes from the 4Q 2016 earnings calls

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US banks outperform European counterparts in 4Q 2016, but full-year results reflect weak start to 2016

2016 was broadly characterized as a challenging year for banks around the world. The first quarter was historically weak, especially for banks’ capital markets businesses. Slow economic growth trends kept interest rates low or negative in most jurisdictions and political uncertainty impacted client activity levels for much of the year.

Nevertheless, US banks finished 2016 on a strong note with generally good fourth-quarter results. European bank performance was not as uniformly positive, reflecting ongoing impacts from a range of extraordinary items.

US banks benefited from a range of revenue tail winds in the fourth quarter, including higher interest rates, the expectation for a pro-growth agenda under the Trump Administration, a stock market rally, and a surge in consumer and business confidence. Strong revenue trends in the Americas drove improved profitability, with 10 of the 11 banks that posted double-digit return on average equity (ROAE) in 4Q 2016 being Americas-headquartered institutions.

  • CFO Marianne Lake said markets revenue at JPMorgan Chase “was the highest on record for a fourth quarter.”
  • Bank of America’s Global Markets segment reported $3.8b in net income in 2016, which CEO Brian Moynihan characterized as, “The most it has earned in the past five years.”

Fortunately, the outlook appears to be brightening for all banks in 2017. US banks remain upbeat about their prospects, and while European banks did not benefit from the revenue tail winds that boosted US banks recently, management appear to be more constructive about the opportunities in 2017.

As Credit Suisse CEO Tidjane Thiam notes, “Our businesses across both wealth management and investment banking have made a strong start to 2017. In January 2017, and so far in February, we have seen significant positive inflows across each of our wealth-management businesses.

“In global markets we have seen a significant rebound in client activity levels across capital markets and trading. Going forward, we believe that we are well-positioned to capture profitable growth opportunities and benefit from this improved market conditions.”

For more information about 4Q 2016 earnings calls and the top 10 themes, download the full report.

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