阿尔巴特资本-美股-银行业-2019年1月银行业分析报告-2019.2.8-40页.pdf

8 February 2019 1/40 BANKING SECTOR REPORT JANUARY 2019 EXECUTIVE SUMMARY US banks significantly outperformed the broad market on MoM basis in January after very weak performance in December when banks tumbled by 15.5%.Thus,banks showed the strongest monthly performance since the election rally of 2016.But BKX index underperformed SPX index in five months over the last 9 and it underperformed the broad market by 14.3%in 2018.In December,US banks skyrocketed by 12.4%MoM vs+7.9%of SPX index.Absolute December performance on MoM basis was+1.8 StD from the mean and it is in the top 4%of the absolute MoM performance of BKX index.Relative December performance was+4.2%MoM,it is+0.9 StD from the mean and it is in the top 15%of relative MoM performance vs SPX.Dynamics within the sector was uniform with positive performance of all members of BKX index.The key outperformer was Synchrony Financial which added more than of market cap in January due to good quarterly results.In turn,PNC Financial increased only by 4.9%MoM despite relief rally as its 4Q18 results missed expectations.US banks reported relatively weak headline numbers primarily because of December turmoil on financial markets but underlying trends remain intact.So market reaction on the earnings season was positive after sell-off in December.15 out of 24 of our group of banks demonstrated positive EPS surprises,the lowest figure over the last 11 quarters while median share of positive EPS surprises was the lowest one over the last 13 quarters.Thus,median EPS surprise for our group of banks was+1%vs median quarterly figure over the last 12 years of 4.3%.Moreover,revenue surprise was negative,the second quarter over the last year,-0.05%.Just 11 companies of our group of banks,or 46%,demonstrated positive surprise vs the median quarterly figure since Q1 2007 of 62.5%.But market perception of the results was clearly positive BKX index increased by 6.5%since the start of the earnings season till the end of January while S&P 500 index added 4.2%over the same time.Median percent change in price around the earnings date of our group of banks of+1.3%was the highest over the last 9 quarters.But consensus estimates were revised down QTD.Thus,1Q19 EPS estimate was revised down by 0.3%QTD,2019 FY EPS estimate was lowered by 0.4%while 2020 FY EPS estimated declined by 0.7%.Overall,operating trends of US banks remain intact with better NIM and corporate loan growth,good cost control and ability to generate operating leverage,high quality of the loan portfolio and still ample capital levels.The key negative driver of profits was weak capital markets and IB revenues but it improved markedly in early 2019.Other components of non-interest revenue werent strong either,especially mortgage fees.Operating leverage remains positive for BKX index members,with median figure of+5.8%in 4Q18 vs+2.2%in 3Q18 and+1.4%in 4Q17.Credit quality of US banks was strong,near the historical lows despite the market expectations of gradual normalization of NCO ratios.However,banks continue trading with significant discount both to historical averages and relative to S&P 500 index.Current discount is more than 2 StD on the basis of samples from 2000 and 2010 years to current moment.Nevertheless,we dont believe that banks will significantly outperform the broad market in the near term given dovish Fed at January meeting and significant decline of probability of further rate hiking in the current year.But we expect that banks will be gradually closing the valuation gap vs SPX taking into account solid operating figures,high level of capital deployment and still low 每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。2/40 Banking Sector Report January 2019 probability of US recession in 2019.Our top peaks remain Bank of America(BAC),JP Morgan Chase(JPM),Wells Fargo(WFC),Citizens Financial(CFG)and Regions Financial(RF).Also,there are investor concerns around leveraged loan market which more than doubled since the last crisis.So,we saw a number of questions to mgmt of US banks regarding state of the leveraged loan market during the last earnings season.Even the Federal Reserve expressed concerns around these markets in its last Financial Stability Review.All the concerns are justified given skyrocketing growth of these loans and CLO markets in recent years,deterioration of credit standards for new leveraged loans,the Fed tightening cycle.So,leveraged loan spreads skyrocketed during December sell-off on the financial markets.But,despite all this,we agree with the comments of the management of US banks that the risks are more than manageable given relatively low exposure of banks on leveraged loans,still strong financial health of US companies,low risk of recession in the next 12 months and higher capital levels of US banks vs pre-Great Recession.The beginning of the year for European banks was also relatively strong after three consecutive months of negative performance in absolute terms.However,banks again underperformed the broad market for the second month in a row.In result,banks underperformed the broad market by 17.1%in 2018.Despite solid growth in January,it remains near the lowest level for more than two years.Absolute January performance of SX7P index was+4.7%MoM or+0.7 std from the mean and this result is in the top 21%of absolute monthly performance of SX7P since the index inception.So,relative monthly performance was-1.4%MoM or-0.3 std and it is in the bottom 33%of relative monthly performance.The key underperformers among European banks were small Italian banks because the ECBs new requirements to coverage of NPLs.Given the high level of NPLs,low level of coverage and technical recession in Italy,Ubi Banca and BPER declined by around 12%in January.In turn,the key outperformers(Julius Baer,Lloyds and BBVA)increased by more than 11%MoM each.European economic data disappointed again in January but loan growth rates remain pretty solid in both corporate and consumer segments.European real GDP growth of+0.2%QoQ or+1.2%yoy in 4Q18 was in-line with expectations but it is the lowest figure on yoy basis over the last 5 years.Moreover,Italian GDP decreased by 0.2%QoQ,the second month in a row implying technical recession in the country.European composite PMI,which is well correlated with GDP growth,decreased again in January,the fifth month of a decline in a row.The figure decreased on MoM basis in 10 months out of last 13.It was just 50.7 pts,-0.4 pts MoM vs expectations of 51.4 pts,more than a five-year low.Both manufacturing PMI and services PMI declined.Manufacturing PMI in Germany already declined below 50 pts in January while German industrial production went down by 1.9%MoM in November as well as in Spain and Italy.ECB admitted that recent weak macro data may suggest some slower growth momentum ahead and that the risks surrounding the euro area growth outlook have moved to the downside but the risk of recession is still low as“financing conditions,favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion”.However,if macro data continues worsening,we dont exclude that the ECBs forward guidance will change as late as at March meeting.Also,it seems that the market expects announcement of TLTRO extension already in March.In any case,it was dovish meeting and the probability of start of ECBs hiking cycle in 2019 declined again,3/40 Banking Sector Report January 2019 implying relatively lengthy period of challenging revenue environment for European banks.The key February event for EU financial industry will be the continuation of earnings season which began in late January.But we dont expect that it will be a game changer for EU banks given weak macro data and still high level of political uncertainty.It is very bumpy road ahead for EU banks in 2019 and we continue to prefer US financial institutions over EU ones at the current moment.4/40 Banking Sector Report January 2019 1.MARKET PERFORMANCE US US banks significantly outperformed the broad market on MoM basis in January after very weak performance in December when banks tumbled by 15.5%.Thus,banks showed the strongest monthly performance since the election rally of 2016.But BKX index underperformed SPX index in five months over the last 9 and it underperformed the broad market by 14.3%in 2018.In December,US banks skyrocketed by 12.4%MoM vs+7.9%of SPX index.Absolute December performance on MoM basis was+1.8 StD from the mean and it is in the top 4%of the absolute MoM performance of BKX index.Relative December performance was+4.2%MoM,it is+0.9 StD from the mean and it is in the top 15%of relative MoM performance vs SPX.Dynamics within the sector was uniform with positive performance of all members of BKX index.The key outperformer was Synchrony Financial which added more than of market cap in January due to good quarterly results.In turn,PNC Financial increased only by 4.9%MoM despite relief rally as its 4Q18 results missed expectations.Chart 1.1.US Banks Performance.BKX Index vs S&P500&S5FINL Indexes Source:Bloomberg Chart 1.2.January US Banks Performance.Leaders and Laggards,1Month Performance,%Source:Bloomberg 97%100%103%106%109%112%115%1-Jan 3-Jan 5-Jan 7-Jan 9-Jan 11-Jan 13-Jan 15-Jan 17-Jan 19-Jan 21-Jan 23-Jan 25-Jan 27-Jan 29-Jan 31-Jan S&P 500 Index S5FINL index BKX Index 28.0%23.8%23.8%23.5%22.9%13.4%6.6%6.1%6.0%5.8%4.9%0%5%10%15%20%25%30%SYNCHRONY FINANCIAL SIGNATURE BANK CITIGROUP NEW YORK COMMUNITY SVB FINANCIAL Median CAPITAL ONE FINANCIAL WELLS FARGO JPMORGAN CHASE NORTHERN TRUST PNC FINANCIAL 5/40 Banking Sector Report January 2019 Europe The beginning of the year for European banks was also relatively strong after three consecutive months of negative performance in absolute terms.However,banks again underperformed the broad market for the second month in a row.In result,banks underperformed the broad market by 17.1%in 2018.Despite solid growth in January,it remains near the lowest level for more than two years.Absolute January performance of SX7P index was+4.7%MoM or+0.7 std from the mean and this result is in the top 21%of absolute monthly performance of SX7P since the index inception.So,relative monthly performance was-1.4%MoM or-0.3 std and it is in the bottom 33%of relative monthly performance.The key underperformers among European banks were small Italian banks because the ECBs new requirements to coverage of NPLs.Given the high level of NPLs,low level of coverage and technical recession in Italy,Ubi Banca and BPER declined by around 12%in January.In turn,the key outperformers(Julius Baer,Lloyds and BBVA)increased by more than 11%MoM each.Chart 1.3.EU Banks Performance.SX7P Index vs STOXX 600 Index Source:Bloomberg Chart 1.4.January EU banks performance.Leaders and Laggards,1Month Performance,%Source:Bloomberg 98%100%102%104%106%108%110%1-Jan 3-Jan 5-Jan 7-Jan 9-Jan 11-Jan 13-Jan 15-Jan 17-Jan 19-Jan 21-Jan 23-Jan 25-Jan 27-Jan 29-Jan 31-Jan STOXX 600 Index STOXX 600 Banks Index 13.7%11.7%11.5%11.3%11.2%4.1%-3.0%-3.3%-6.5%-11.6%-12.1%-15%-10%-5%0%5%10%15%20%JULIUS BAER LLOYDS BBVA CREDIT SUISSE DEUTSCHE BANK Median BANKINTER CYBG DANSKE BANK UBI BANCA EMILIA ROMAGNA 6/40 Banking Sector Report January 2019 2.COMPANY NEWS USA JP Morgan Chase 4Q 2018 Earnings JP Morgan(JPM)reported 4Q18 EPS of$1.98,significantly missing Bloomberg median consensus estimate of$2.21(min$2.05/max$2.34).It was the first negative EPS surprise for JPM over the last 10 quarters.EPS included a number of onetime charges but even taking into account this fact it was clearly challenging quarter for the flagship of US banking industry.JPMs 4Q18 revenue was$26.8 Bn vs consensus of$26.9 Bn(min$26.1 Bn/max$28.1 Bn).The miss was mainly driven by weak non-interest revenues,especially in FICC trading because of December turmoil.In turn,NII and NIM were strong with restrained growth of deposit beta and relatively solid loan growth.Underlying trends remain strong but miss on reported figures took its toll.So,initial reaction of quotes was very negative with pre-market decline of more than 3%but JPM ended the day of report in a green zone(despite also weak figures of WFC),+0.7%vs+1%of BKX index and+1.1%of S&P 500 index.Overall non-interest revenues were weak across majority of segments,missing Bloomberg consensus estimate of$12.65 Bn by 2.8%,-10.6%qoq.FICC trading revenues declined by 18%yoy to$1.86,missing consensus of$2.29 Bn because of weak activity across almost all segments except for Emerging Markets.In turn,equity trading increased by 2%yoy to$1.32 Bn,in-line with estimates.IB fees were almost flat yoy at$1.72 Bn,slightly missing expectations of$1.77 Bn.The key driver was advisory while both equity and debt underwriting declined yoy.Mortgage fees were just$203 mln in 4Q18,-46%yoy.Table 2.1.JPM 4Q18 Earnings.Actual vs Estimates Chart 2.1.JPM price vs EPS estimates Actual Estimates EPS,$1.98 2.21 Revenue,$bn 26.8 26.9 NII(FTE),$bn 14.5 14.26 FICC Trading Rev,$bn 1.86 2.29 Equity Trading Rev,$bn 1.32 1.32 IB Revenue,$bn 1.72 1.77 Non-Interest Expense,$bn 15.7 15.6 Provision,$bn 1.55 1.31 NIM 2.54 2.54 Source:Bloomberg Source:Bloomberg In turn,NII were strong,markedly beating consensus estimate of$14.26 Bn.4Q18 NII on FTE basis was$14.5 Bn driven by NIM growth because of December hike and accelerating loan growth.NIM increased by 3 bps qoq to 2.54%in 4Q18,in line with consensus.Total yield of interest-earning assets increased by 13 bps qoq,driven by loan yield which increased by 15 bps qoq vs+12 bps qoq in 3Q18.Total cost of interest-bearing liabilities also slightly accelerated,increasing by 13 bps qoq in 4Q18 vs+12 bps qoq in 3Q18.But the cost of interest-bearing deposits grew slower than loans yield,despite relatively solid deposits growth of 4.6%yoy.In turn,average noninterest-bearing deposits continued to 90 95 100 105 110 115 120 9.8 10.0 10.2 10.4 10.6 10.8 11.0 11.2 1-Aug 15-Aug 29-Aug 12-Sep 26-Sep 10-Oct 24-Oct 7-Nov 21-Nov 5-Dec 19-Dec 2-Jan 16-Jan 30-Jan EPS est,$,CY EPS est,$,NY Price,$r.h.s.7/40 Banking Sector Report January 2019 decline,-2%qoq.EoP loans markedly accelerated in 4Q18,adding 3.2%qoq or 5.8%yoy.JPM expects that 1Q19 NII will be flat qoq and it is slightly higher in absolute terms than it was expected by the market before the earnings season given positive surprise on NII in 4Q18.As for FY NII growth,it is expected by mgmt that it will be strong but not as strong as it was in 2018.Credit quality remains strong with solid dynamics of majority of quality indicators of both corporate and consumer portfolios but JPM missed on provisions in 4Q18,$1.55 Bn vs consensus of$1.31 Bn,+18.3%yoy.The key driver of miss was$161 mln reserve build in corporate segment but there were just isolated cases and JPM has no significant concerns about overall credit quality of corporate portfolio.Overall,underlying operating trends were good,fully reflecting th