Zacks Industry Outlook Highlights: UBS AG, Credit Suisse Group, Banco Bilbao Vizcaya Argentaria, S.A. and Grupo Financiero Galicia S.A.

For Immediate Release

Chicago, IL – July 7, 2011 – Today, Zacks Equity Research discusses the Non-U.S. Banks, including UBS AG (UBS - Snapshot Report), Credit Suisse Group (CS - Snapshot Report), Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - Snapshot Report) and Grupo Financiero Galicia S.A. (GGAL - Snapshot Report).

A synopsis of today’s Industry Outlook is presented below. The full article can be read at   http://www.zacks.com/stock/news/56475/Non-U.S.+Banks+Stock+Update+-+July+2011

The industry has been adopting tougher regulatory measures to prevent the recurrence of a global financial crisis and restore public confidence. In June, the oversight body of the Basel Committee on Banking Supervision proposed new rules that would force the world's biggest banks to hold extra capital on their balance sheets as protection and prevention against any financial catastrophe. The targeted banks are those that could threaten global economy if they collapse.

This extra capital requirement is an addition to the set of minimum capital standards, known as Basel III, proposed by regulatory officials of more than two dozen countries in 2010.

Under the proposed rule, mega banks worldwide would have to maintain an extra 1% to 2.5% of capital on their balance sheets in addition to the Basel III mandate of 7%. The percentage will vary, depending on the size of their balance sheets. The Basel Committee will allow the target banks three years –– 2016 to 2018 –– to meet the new capital requirements.

The Swiss government was an early bird, proposing to increase the minimum common equity requirement to 10% for UBS AG (UBS - Snapshot Report) and Credit Suisse Group (CS - Snapshot Report).

With these regulatory measures, the individual capital structures of banks will remain under constant pressure. The resulting slowdown at some big banks could be seen as a blessing in disguise as it would eventually make their balance sheets more recession-proof.

Balance sheet repair and credit environment recovery will make the valuations of some non-U.S. banks attractive. Particularly, valuations of the mega banks, which could comfortably maintain the minimum capital norms mandated by the Basel Committee, will experience the fastest valuation upside. Consequently, we believe this would be the perfect time for mid- to long-term investors to consider non-U.S. bank stocks, as their valuations are now comparatively cheap.

Investors with short-term targets, however, should be very careful while choosing non-U.S. stocks at this point as near-term fundamentals remain weak; asset quality lacks potentiality to rebound anytime soon as default rates for individuals and companies are not expected to materially subside; and revenue growth might remain weak with faltering loan growth.

The sector anticipates an upturn in the second half of 2011. But this will vary from country to country, depending on industry circumstances. We believe that banks in emerging economies –– Chile, Brazil or India –– might make more attractive investments, akin to our expectations from certain regional banks in the U.S.

The same, however, cannot be said of European institutions. In early 2010, the debt crisis originating in the Greek economy shook the stability of the European Union's (EU) monetary policies. Starting as a solvency crisis in a single country, the turmoil threatened the entire Euro-zone.

Greece adopted measures to minimize government spending and stress test results were largely reassuring, but there is no guarantee that the country is out of the woods as affluent domestic and foreign investors will not stop withdrawing their money from Greek banks anytime soon. Also, rising inflation will force regulators to tighten their policies in the Euro-zone, making banks less flexible.

In May 2011, related to the refinancing of public debts, the crisis in Greece re-emerged. Political instability further compounded the problem. However, the situation is now under control with the intervention of the Greek government and financial assurance from European Union leaders.

Overall, the European Union is making progress in restoring faith and confidence of investors as well as the health of the continent’s banking system, but the issue is far from fully addressed.

Coming to banks in emerging economies, they will obviously face asset quality issues. However, they are not plagued by other significant problems that many of the larger banks face in continental Europe and the United Kingdom, such as toxic securities and dilution from capital raising. Moreover, these emerging-market banks generally tend to be well capitalized, aren't as heavily exposed to property markets, and have significant and growing sources of non-interest income.

Banks are finally learning from the crisis they created. In 2010, banks in emerging economies performed remarkably well in serving as a stabilizing force in global economic recovery.

Overall, a key determinant for quick recovery will be the quality of risk analysis and risk-awareness in decision-making and incentive policies. So, we believe that accumulating larger capital buffers over the cycle and reducing pointless complexity in business will be crucial to banking performance.

Also, the primary attention of policymakers should be on determining how much longer the fiscal stimulus should continue, ensuring that it is not withdrawn before a clearer sign of economic recovery is visible.

OPPORTUNITIES

Currently, financial institutions in the Zacks covered non-U.S. bank universe with a Zacks #1 Rank (Strong Buy) are Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - Snapshot Report) and Grupo Financiero Galicia S.A. (GGAL - Snapshot Report).

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