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Announcement:

Moody's: Profits up for European Global Investment Banks in Q1 amid strong capital markets results

08 May 2017

London, 08 May 2017 -- European GIBs reported good financial results in the first quarter of 2017, with a strong contribution from their investment banking activities, according to Moody's Investors Service in a report published today.

Moody's report, entitled "Global Investment Banks -- Europe: Q1 2017 Update; Strong Capital Markets Results Drive Profits Up," is available on www.moodys.com. The rating agency's report does not constitute a rating action.

"In the first quarter of this year, the eight European GIBs reported an aggregate pre-tax profit of $15.6 billion, up 16% on the year," says Andrea Usai, Senior Vice President at Moody's. "This improvement reflects strong investment banking results as well as the group's relatively weak performance in the same period last year."

Aggregate revenues were broadly flat in the quarter at $64.2 billion. While capital markets revenues were up across the board, some banks reported weaker revenues from their non-capital markets activities in retail, commercial and corporate banking as well as asset management and other wholesale operations. For some firms, the disposal of further legacy asset stocks also reduced revenues.

Credit Suisse returned to profit in Q1 2017, from a loss in the same period a year earlier, and Deutsche Bank and Royal Bank of Scotland had particularly strong profit improvements from a year earlier -- up 48% and 47%, respectively. This reflected relatively weak performance in the first quarter of 2016 and lower non-core losses.

Barclays' much stronger pre-tax profit increase, at 84%, was driven by higher market shares in select capital markets products, the benefits of dollar appreciation given its sizeable US operations, and lower losses from its non-core unit. UBS (+71%) also benefitted from the rebound in capital markets activity as well as stronger performance of its large wealth management operations.

Both BNP Paribas and Société Générale, too, benefited from stronger investment banking performance and growing profit contributions from their international retail operations, specialised financial services, asset management and insurance. However, Société Générale's lower pre-tax profits, at -11%, were impacted by a €350 million litigation provision. Higher restructuring and customer redress charges weighed on HSBC's first quarter pre-tax earnings, down 19%.

Overall, operating costs for the European GIBs remained high but lower than in the same period last year as some of the banks continued to account for restructuring charges, losses on legacy asset disposals and expenses related to cost rationalisation. For some firms, higher expenses partly resulted from organic growth.

Regulatory capitalisation was up across the board during the quarter, with regulatory capital ratios increasing for all eight European GIBs, in some cases significantly. This was mostly a result of retained profits and further reductions in risk-weighted assets (RWAs) following additional disposals of legacy assets and businesses no longer deemed strategic. Deutsche Bank and Credit Suisse also announced capital-raising initiatives. Funding and liquidity profiles remained sound and broadly unchanged.

Subscribers can access the report at:

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1070682

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Andrea Usai
Senior Vice President
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Gregory W. Bauer
MD - Global Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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