What are bank executives discussing on earnings calls?

Top themes from Q3 2012

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Our analysis of the leading issues emerging from the quarterly earnings calls of the largest global banks identifies what’s top of mind for banking leaders. The top 10 themes from Q3 2012 are shown below and compared to themes from Q2 2012.

As in previous quarters, banks continue to look internally to pull the performance levers within their control, paying close attention to expense management, capital strength and prudent risk management. In Q3 2012, however, many banks also adopted a more forward-looking view as they worked to define optimal business models for future opportunities and position themselves for an eventual recovery in the operating environment.

Quarter-over-quarter changes in top themes

(listed from most common to least)
Q3 2012 rank Change Q2 2012 rank
Responses to the macro-environment 1.1 1.1
Capital issues 1.2 1.2
Expense trends/investments in the business 1.3 1.3
Drivers of earnings performance 1.4 1.4
Regulatory issues 5 8.1
Cross-border activities 6 8.2
M&A strategies 7.1 6.1
Lending trends 7.2 5
Credit quality trends 9 6.2
Funding strategy and liquidity management 10 10

Top themes from Q3 2012 bank earning calls

Improvements on the macro front, but headwinds continue

Improved economic indicators in the US and moves by the ECB to support the euro fueled cautious optimism and, in some regions, improved activity levels in selected retail and capital markets businesses. Nevertheless, banks worldwide continued to operate in a challenging environment that is expected to persist for several more quarters. In addition, management comments provided insight into how banks are examining and adapting their business models so they will be well-positioned to thrive when conditions improve.

“[W]e are modeling a range of options as to where we can grow significantly, where we can turn around businesses or where we have to run them down or exit them. While we remain absolutely committed to our universal banking model, this detailed assessment will allow us to determine the future size, shape and composition of Barclays.”

– Antony Jenkins, Barclays CEO

Capital levels remain strong

In Q3 2012, banks continued to demonstrate the ability to maintain or increase strong capital ratios through retained earnings, risk-weighted asset reductions, asset sales and other strategic measures. Management at several banks took the opportunity to highlight continued capital strength as an indicator of their ability to transform their business models and position for future growth.

“Our industry-leading capital position gives us a firm foundation to accelerate our strategic transformation.”

– Sergio Ermotti, UBS CEO

Expense management is critical to future business models

Expense management, which has been used as a key lever for boosting profitability, is now also a primary element of banks’ plans to reshape their businesses. During the Q3 2012 earnings season, management commented on how certain expense management strategies, including organic investments and headcount decisions, are supporting efforts to simplify, reshape and reposition the business.

“We have been focused on making the investments necessary to ha

ve positive operating leverage, recognizing it will be more difficult to achieve in an environment of slowing revenue growth.”

– Ed Clark, Toronto Dominion Bank CEO

Download our Q3 2012 bank earnings calls report for more details about these themes.