For Immediate Release
Chicago, IL – March 1, 2012 – Today, Zacks Equity Research discusses the Foreign Banks Industry, including HDFC Bank Limited ( (HDB - Analyst Report), National Australia Bank Limited (NABZY), National Bank of Canada (NTIOF), Shinhan Financial Group Co Ltd. ( (SHG) and Westpac Banking Corporation ( (WBK).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/70524/Foreign+Banks+Stock+Update+%96+March+2012
European banks are most likely to underperform in the upcoming quarters primarily due the ongoing debt crisis in the nation and resulting capital pressure and deleveraging risk.
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 spread over to the entire Euro-zone.
The situation did not stabilize to a great extent in 2011 despite financial assurance from the European Union leaders. Entering 2012, the European debt crisis has heightened spreading fears of a financial collapse in the continent.
Though Italy and Spain showed signs of improvement with support from the government and European Central Bank, conditions in Greece remain uncertain due to issues related to additional bailout funds.
Moreover, the high inflation will continue to force regulators to tighten their policies in the Euro-zone, making banks less flexible.
Overall, the European Union is trying hard not just to restore investor confidence but also the health of the continent’s banking system. The issue, however, remains far from being satisfied.
Coming to banks in emerging economies, the asset quality trouble is obvious. However, these are not plagued by other serious 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.
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.
Among the non-U.S. banks, we recommend HDFC Bank Limited ( (HDB - Analyst Report), National Australia Bank Limited (NABZY), National Bank of Canada (NTIOF), Shinhan Financial Group Co Ltd. ( (SHG) and Westpac Banking Corporation ( (WBK) with a Zacks #1 Rank (short-term Strong Buy rating).
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