瑞信-美股-银行业-市场银行业务2018年总结：对未来前景至关重要的宏观信心-2019.1.3-27页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.3 January 2019Americas/United StatesEquity ResearchMultinational Banks Banking on the Markets MONTHLYResearch AnalystsSusan Roth Katzke212 325 1237susan.katzkecredit-Adam Krasner,CFA212 325 7116adam.krasnercredit-Gerard Padilla212 325 3579gerard.padillacredit-Thats a Wrap on 18Macro Confidence Critical to the Forward LookThe year 2018 started strong but ended on a weaker note as late cycle/macro concerns took hold of sentiment.What we observed increased volatility and,with that,a material increase in trading volume,both equities and fixed income.But this volume came with a material decline in asset prices and a diminished level of investor risk appetite.We reduced our expectations for trading(fixed income in particular),investment banking and asset management revenue in late December;the stocks seem to discount at least this much weakness.Where to from here the macro environment and with that,confidence,risk appetite and asset price support,remain critical to a constructive capital markets revenue forecast.Investment Banking was weaker with fees down 13%yr/yr and down 7%qtr/qtr for the fourth quarter;underwriting dragged down the aggregate;M&A fees were up 27%yr/yr and 23%qtr/qtr.Announced M&A was down;that plus completions have driven the backlog down 31%sequentially(this does not bode well for related revenue generation in 1H19).See Figure 1.Figure 1:Investment Banking and Trading Revenue Indicators,4Q18Yr/YrQtr/QtrYr/YrQtr/QtrInvestment Banking Fees:Equities prices(eop):ECM:S&P 500-6%-14%Equity underwriting-36%-18%MSCI World index4%-13%IPO fees-30%4%Fixed Income prices(eop):High-grade corporates-5%1%DCM:High yield corporates-9%-7%Debt underwriting-37%-30%Equites trading volume&volatility:Loan syndication-18%-16%U.S.cash equities33%35%European cash equities2%10%M&A and advisory activity:Equity futures&options36%27%Completed M&A volumes48%53%VIX(avg)105%63%Announced M&A volumes-19%-6%Fixed Income trading volume&volatility:M&A backlog-38%-31%U.S.cash fixed income10%17%M&A fees27%23%Fixed income derivatives21%24%Total investment banking fees:-13%-7%MOVE index(avg)14%15%CVIX index(avg)9%8%Source:Dealogic,Credit Suisse estimates.Data updated as of 12/31/18Fourth quarter trading volumes were up alongside heightened equity and fixed income market volatility.Trends are detailed herein,with greater predictive power in the CS Markets Index,our proprietary model gauging FICC and Equities trading revenue.Our index now points to trading revenue down 5-10%yr/yr and down 15-20%qtr/qtr in 4Q18here too weaker into the finish:Large Cap Banks:Whats the Market Telling Us4Q18 FinalCS Markets Index Shows Trading Revs Weaker.3 January 2019Banking on the Markets2Additional detailAsset prices down;risk appetite still weak.At the market close on December 31st,equity prices were generally down and down hard relative to third quarter end levels:the S&P 500 was down 14%;Europe was down 13%;the Far East was down 13%;Emerging Markets indices were down 8%;Latin America was flattish.High yield prices were down and high grade credit prices were flattish.To be sure,the bank by bank impact of this asset price weakness will vary based on business and portfolio mix and pricing(lagged vs coincident,sliding scales with floors,etc.).The Credit Suisse Global Risk Appetite index averaged-1.90 in December(vs.-1.80 in November),and ended the month a bit worse,at-2.03(not panic,but certainly weak).Fund flows were weak in Decembersubstantial net outflows to equity and taxable fixed income funds;net inflows to money market funds.With respect to the CS Large Cap Bank stocks Well continue to assess valuations cognizant of the economic cycle,but equally as willing to embrace the changing operating and regulatory environment,for better(improved underlying economic growth,operating leverage realization;sustained low credit costs)or worse(intensifying competition;a turn in the economic cycle).All in,our base case estimates translate to 7-10%annual EPS growth into 2020 and a 16%ROTCE,on average.Our blue sky estimates are 20%above base case,with near equal incremental upside in the stocks.Looking at a weighted average of our blue sky,base case and gray sky scenarios translates to 25%+total return in our recommended namesBAC,JPM,MS,GS and C.We strongly favor the universal banking model with its multiple levers for growth and greater potential for realization of scale economies.Please see our recent research for greater context around our recommendations:Large Cap Banks:Fear Factor:Perspective Setting with a Look Backwards and Forward at Cyclical Turns and Large Cap Banks:Life in Limbo:Revisiting Our Blue Sky/Gray Sky Scenarios,Weighting and Target Prices3 January 2019Banking on the Markets3Investment Banking ActivityFigure 2:Investment Banking Industry Quarterly Trends US$in billions,unless otherwise stated4Q171Q182Q183Q184Q18Yr/YrQtr/Qtr20172018Yr/YrMerger and Acquisition(M&A)Activity:Completed M&A volume$854$931$1,088$826$1,26648%53%$3,626$4,11113%M&A fees generated$6.2$6.3$7.1$6.4$7.927%23%$25.5$27.68%Fee margin(bps)7367657762-15%-20%7068-3%Announced M&A$1,051$1,179$1,223$907$850-19%-6%$3,530$4,16018%M&A backlog$2,742$2,846$2,935$2,484$1,704-38%-31%$2,742$1,704-38%Equity Underwriting(ECM)Activity:IPOs$63$51$59$47$53-15%13%$199$2095%Follow-ons$136$133$123$94$63-54%-33%$574$413-28%Convertibles$26$35$30$20$14-46%-28%$100$98-2%Total underwriting volume$225$218$212$161$130-42%-19%$873$721-17%Equity underwriting fees$4.6$4.3$4.6$3.6$3.0-36%-18%$18.0$15.5-14%Fee margin(bps)20519821922522711%1%2062175%Debt Underwriting(DCM)and Loan Syndication Activity:Investment grade$712$858$850$810$605-15%-25%$3,331$3,123-6%High yield$148$143$111$78$42-72%-46%$597$374-37%Corporate debt$860$1,000$962$888$647-25%-27%$3,928$3,497-11%Government debt$341$607$437$335$311-9%-7%$1,840$1,689-8%Other debt$393$366$395$339$290-26%-14%$1,298$1,3907%Total DCM volume$1,594$1,973$1,793$1,561$1,248-22%-20%$7,066$6,576-7%Investment grade loans$558$621$722$488$66319%36%$1,938$2,49429%Leveraged loans$587$515$716$344$406-31%18%$2,180$1,981-9%Loan syndication volume$1,145$1,136$1,438$832$1,070-7%29%$4,119$4,4759%DCM/loan syndication volume$2,739$3,109$3,231$2,394$2,318-15%-3%$11,185$11,051-1%DCM fees$5.4$6.0$5.4$4.9$3.4-37%-30%$23.5$19.7-16%Loan syndication fees$4.1$4.0$5.6$4.0$3.4-18%-16%$16.2$16.95%DCM/loan syndication fees$9.5$9.9$11.0$8.9$6.8-29%-24%$39.6$36.6-8%Fee margin(bps)3532343729-16%-21%3533-7%M&A fees generated$6.2$6.3$7.1$6.4$7.927%23%$25.5$27.68%Equity underwriting fees$4.6$4.3$4.6$3.6$3.0-36%-18%$18.0$15.5-14%DCM/loan syndication fees$9.5$9.9$11.0$8.9$6.8-29%-24%$39.6$36.6-8%Investment Banking Fees$20.3$20.5$22.8$18.9$17.6-13%-7%$83.1$79.7-4%As of December 31,2018.Source:Dealogic,Credit Suisse estimates3 January 2019Banking on the Markets4Figure 3:Investment Banking Industry Monthly TrendsUS$in billions,unless otherwise statedDec-17Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Yr/Yr Mth/MthM&ACompleted$289$272$298$361$248$322$518$330$294$203$541$377$34720%-8%M&A fees$2.1$1.9$2.0$2.3$2.1$2.4$2.6$2.9$2.0$1.5$3.3$2.5$2.0-1%-18%Fee Margin(bps)71706765847351876974626659-17%-11%#DIV/0!#DIV/0!Announced$506$365$330$484$483$410$330$338$309$260$346$294$211-58%-28%Backlogs$2,742$2,943$2,989$2,846$3,094$3,105$2,935$2,702$2,602$2,484$2,122$1,970$1,704-38%-13%Equity UnderwritingIPO$14$16$10$24$11$21$27$14$13$20$20$6$28107%401%Follow-on$41$40$33$59$34$48$42$28$23$44$20$27$16-61%-40%Convertible$8$21$4$10$5$12$12$5$5$9$2$10$2-72%-77%Total Volume$63$77$48$93$50$81$81$47$41$72$42$42$46-26%10%Equity underwriting fees$1.2$1.7$0.9$1.6$1.1$1.6$1.9$1.1$0.9$1.6$1.0$0.8$1.1-10%31%Fee Margin(bps)19022319717722719723722422022725219623322%19%Debt Underwriting&Loan SyndicationInvestment Grade$120$295$217$346$317$278$254$215$248$347$233$285$87-27%-69%High Yield$37$61$30$52$52$26$34$19$24$35$21$16$5-87%-70%Corporate Debt$158$356$246$398$369$304$288$234$273$381$255$301$92-42%-69%Government Debt$53$306$165$135$180$117$140$118$87$130$163$104$44-18%-58%Other Debt$117$116$115$135$134$126$134$112$108$120$114$121$55-53%-54%Total Debt$329$778$527$668$683$547$563$463$467$631$532$525$191-42%-64%Investment Grade Loans$217$118$155$348$210$241$271$163$149$176$206$231$2264%-2%Leveraged Loans$178$117$171$226$188$257$271$110$138$97$175$133$98-45%-27%Total Loans$395$235$326$574$398$497$542$272$287$273$380$365$324-18%-11%Total Debt&Loans Volume$724$1,013$853$1,242$1,082$1,044$1,105$735$754$904$912$890$515-29%-42%Debt Fees$1.1$2.1$1.5$2.3$2.0$1.6$1.8$1.3$1.5$2.1$1.5$1.5$0.5-59%-69%Loan Fees$1.4$1.1$1.3$1.6$1.3$2.0$2.3$1.3$1.4$1.3$1.4$1.3$0.7-50%-43%DCM/loan syndication fees$2.6$3.2$2.8$4.0$3.3$3.6$4.1$2.6$2.9$3.4$2.8$2.8$1.2-54%-57%Fee Margin(bps)35323332313537353838313123-36%-26%As of December 31,2018.Source:Dealogic,Credit Suisse estimates3 January 2019Banking on the Markets5Investment Banking ActivityGlobal Fee PoolLooking at the month of December,the global investment banking fee pool of$4.3 billion was down 26%relative to year ago levels and down 29%relative to the month of November.December by Product:Completed M&A fees were down 1%yr/yr and down 18%month/month;equity underwriting fees were down 10%yr/yr and up 31%month/month;debt underwriting fees were down 59%yr/yr and down 69%month/month with loan syndication fees down 50%yr/yr and down 43%month/month.Looking at full 4Q18 results:the global investment banking fee pool was down 13%from year-ago levels and down 7%relative to 3Q18.2018 full year:Goldman Sachs ranked#1 in announced M&A;JPMorgan ranked#1 in debt and equity underwriting fee share.Figure 4:Global Investment Banking Fee Pool Figure 5:Global Investment Banking Fee Pool US$in billions,unless otherwise stated2018$0$2$4$6$8$10Dec-00Dec-03Dec-06Dec-09Dec-12Dec-15Dec-18Global Disclosed FeesTwelve Months Moving Avg Completed M&A35%Equity Underwriting19%Debt Underwriting25%Loan Syndication21%As of December 31,2018.Source:DealogicAs of December 31,2018.Source:DealogicFigure 6:Global Investment Banking League Tables by Product Full Year 2018Based on global deal volume for M&A;global disclosed fees for underwritingAnnounced M&A Value($Bn)%ShareDebt UnderwritingFees($mil)%ShareEquity UnderwritingFees($mil)%Share1 Goldman Sachs$1,29131%1 JPMorgan$1,4347%1 JPMorgan$1,4069%2 Morgan Stanley$1,07826%2 Bank of America$1,2786%2 Morgan Stanley$1,3859%3 JPMorgan$1,02825%3 Citi$1,1536%3 Goldman Sachs$1,3729%4 Citi$82520%4 Morgan Stanley$9515%4 Bank of America$7955%5 Bank of America$62715%5 Goldman Sachs$9445%5 Citi$7885%6 Barclays Capital$51012%6 Barclays Capital$9085%6 Credit Suisse$6464%7 Lazard$48312%7 Credit Suisse$7214%7 Deutsche Bank$4153%8 Credit Suisse$47912%8 Wells Fargo$6613%8 UBS$3692%9 Deutsche Bank$41010%9 Deutsche Bank$6503%9 Jefferies$3502%10 Evercore$3929%10 HSBC$6433%10 Nomura$3212%Industry Totals$4,160Industry Totals$19,669Industry Totals$15,538 As of December 31,2018.Source:Dealogic3 January 2019Banking on the Markets6M&A ActivityCompleted M&A volumes During December,completed M&A volume of$347 billion was up 20%yr/yr and down 8%month/month.Looking at full 4Q18 results completed M&A was up 48%yr/yr and up 53%qtr/qtr.Announced M&A and the Backlog During December,the pace of new announcements($211 billion)was down 58%yr/yr and down 28%month/month.The M&A backlog in December decreased to$1,704 billion(down 38%yr/yr;down 13%month/month).M&A by Region and Sector in 2018,announced M&A was dominated by the Americas and EMEA(representing 48%and 29%of total volume,respectively),with IT(27%),Energy(21%),Financials(15%),Healthcare(13%),and Consumer(10%)making up the most active sectors.Figure 7:Completed M&A Volumes Figure 8:M&A Disclosed Fees US$in billions,unless otherwise statedUS$in billions,unless otherwise stated$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000199819992000200120022003200420052006200720082009201020112012201320142015201620172018$0.0$5.0$10.0$15.0$20.0$25.0$30.0$35.0199819992000200120022003200420052006200720082009201020112012201320142015201620172018 As of December 31,2018.Source:DealogicAs of December 31,2018.Source:DealogicFigure 9:Announced M&A VolumeFigure 10:M&A Backlog,monthly basis US$in billions,unless otherwise stated$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000199819992000200120022003200420052006200720082009201020112012201320142015201620172018US$in billions,unless otherwise stated$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000Dec-00Dec-03Dec-06Dec-09Dec-12Dec-15Dec-18As of December 31,2018.Source:DealogicAs of December 31,2018.Monthly basis,month end data points.Source:Dealogic3 January 2019Banking on the Markets7Figure 11:Announced M&A Volume By RegionFigure 12:Announced M&A Volume By Sector2018Americas48%EMEA29%Asia Pacific23%2018IT27%Energy21%Financials15%Healthcare13%Consumer10%Other14%As of December 31,2018.Source:DealogicAs of December 31,2018.Source:DealogicWhere Are We in the M&A Cycle?Looking back historically,industry M&A activity is strongly correlated with overall equity markets,as improving valuations and more positive market tone often prove to be catalysts for increased deal activity.One way we gauge where we are in the M&A cycle is by looking at activity levels as a percentage of overall market capitalization.On a completed basis,activity in the U.S.was 7%of U.S.2018 market cap,below its historical average(9%)and closer to cyclical trough levels.CEO ConfidenceAsk the management of any advisory company what it takes for M&A to increase,and they will tell you its CEO confidence.As of the last update,U.S.CEO Confidence had declined to 55(3Q18 is the latest data point)from a reading of 63 in the prior quartera reading of more than 50 points reflects more positive than negative responses.Figure 13:U.S.M&A as a Percent of U.S.Market Cap Figure 14:U.S.CEO Confidence,as of 3Q18M&A based on completed deal volume22%12%8%7%9%0%5%10%15%20%25%1985198819911994199720002003200620092012201520182000 Prior Peak:12%2007 Peak:11%2018:7%50203040506070803Q953Q963Q973Q983Q993Q003Q013Q023Q033Q043Q053Q063Q073Q083Q093Q103Q113Q123Q133Q143Q153Q163Q173Q18Current:55Sources:FactSet,Dealogic.Current through December 31,2018.Source:The Conference BoardEquity Underwriting ActivityEquity underwriting volume in December was down 26%yr/yr and up 10%month-to-month;related disclosed fees were down 10%yr/yr and up 31%month/month.Month-to-3 January 2019Banking on the Markets8month activity was higher for IPO and lower for follow-on and convertible.Looking at full 4Q18 results overall equity underwri