For Immediate Release
Chicago, IL – November 2, 2012 – Today, Zacks Equity Research discusses the U.S. Foreign Banks, including Barclays plc (BCS - Analyst Report), Credit Suisse Group (CS - Snapshot Report), HSBC Holdings plc , Deutsche Bank AG (DB - Analyst Report) and UBS AG (UBS).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
Valuations Look Attractive
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 a good time for long-term investors to consider foreign bank stocks, as the valuations at present look comparatively cheaper.
Investors with short-term targets, however, should be watchful while choosing foreign bank stocks at this point as near-term fundamentals remain weak. Asset quality lacks the potential 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 and a low interest rate environment.
If any improvement occurs in the near to mid term, it will vary from country to country, depending on industry circumstances.
Ratings downgrades are a major threat for major global banks. In July 2012, Moody’s Investors Service downgraded credit ratings of 15 systematically important banks in the U.S., U.K. and Europe. The foreign banks include the likes of Barclays plc (BCS - Analyst Report), Credit Suisse Group (CS - Snapshot Report), HSBC Holdings plc , Deutsche Bank AG (DB - Analyst Report) and UBS AG (UBS).
The downgrade was based on the agency’s concern related to these banks’ significant exposure to the volatility and expected losses from capital market activities. This rating action could compel many of these banks to post billions in additional collateral, which will make derivative trading costly. Also, already-high borrowing costs for these banks will increase further.
In October 2012, Standard and Poor’s (S&P) downgraded three French banks, including BNP Paribas, due to rock bottom French consumer confidence. Also, in a report issued in the same month, Moody’s kept a negative outlook on Germany's banking system as it believes intense competition, margin pressure due to a low interest rate environment, high balance-sheet leverage and low pre-provision profits will make it difficult for a number of German banks to stay afloat if they incur major losses.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment
Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4581.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339