Global banking and capital markets sector banking and capital markets sector 3 Scope, limitations...

Global banking and capital markets sector Key themes from 4Q13 earnings calls

March 2014

Global banking and capital markets sector 2

Content

Scope, limitations and methodology of the review 3

Top 10 key themes: 4Q13 earnings season 4

Key themes overview 6

Theme 1.1: Quarterly earnings performance — record highs, record lows and everything in-between ....................... 6

Theme 1.2: Expense trends — banks highlight simplification as a key strategic cost management measure ............... 8

Theme 1.3: Capital strength and plans — banks plan capital cushions in excess of regulatory requirements ............ 10

Theme 4.1: Regulatory — global harmonization of rules seems increasingly elusive ............................................... 11

Theme 4.2: Cross-border strategies — banks continue to see opportunities in emerging markets ........................... 12

Theme 6.1: Credit quality trends — lower credit costs are not yet a universal feature of the sector ........................ 13

Theme 6.2: Lending trends — modest lending growth expected in 2014 .............................................................. 14

Theme 8: M&A strategies — asset sales reflect new rules and focus on core businesses ......................................... 15

Theme 9: Channel strategies — digital investments address changing customer behavior ...................................... 16

Theme 10: Conduct issues — banks grapple with elevated legal expenses and the need to restore trust .................. 17

Appendix 18

Summary of key banking sector themes ............................................................................................................. 18

Select KPIs ....................................................................................................................................................... 20


Scope, limitations and methodology of the review

The purpose of this review is to examine the key themes discussed during the 4Q13 earnings reporting season among 31 global institutions operating within the banking and capital markets sector.

This review is limited to the examination of transcripts of the earnings conference calls held from 5 December 2013 to 11 March 2014. With one exception, the review does not take into consideration information from other sources, such as news reports, annual reports and company press releases. The exception is Royal Bank of Scotland, which deferred many questions and answers to a strategic review presentation held on the same day as the earnings conference call.

The period covered was 4Q13, ended 31 December 2013. Exceptions are the following:

• Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC) and Toronto-Dominion Bank, for which the period covered, 4Q13, ended 31 October 2013.

• Nomura Holdings, for which the period covered was 3Q14.

Banks were selected based on their size and the availability of earnings call transcripts. Every effort was made to ensure a global sample of banks was included in the review. Exceptions were the following:

• Mitsubishi UFJ Group Bank, Mizuho Financial Group and Sumitomo Mitsui Financial Group were excluded from the analysis due to the lack of transcript availability.

• Bank of China, Industrial and Commercial Bank of China and Intesa Sanpaolo were excluded due to the timing of their 4Q13 results reporting.

• National Australia Bank, Australia and New Zealand Banking Corporation and Macquarie Group do not hold interim earnings conference calls.

Net income, revenue and expense data are not provided for Standard Chartered.

• Standard Chartered discloses half-yearly and annual income statement figures only, which do not compare with the quarterly data reported by the other banks in the analysis.


Top 10 key themes: 4Q13 earnings season

In 2013, the global banking sector faced ongoing challenges related to volatile economic conditions, persistent low interest rates, conduct-related issues and regulatory reform. During the 4Q13 earnings season, however, management comments indicated that these headwinds did not prevent banks from making significant progress against strategic priorities. This, in their opinion, leaves them well-positioned for growth at the start of 2014.

The 4Q13 earnings calls were characterized by a tone of cautious, yet growing, optimism. At the same time, there was a realistic and industry-wide acknowledgement that many of the headwinds that have characterized the past few years will remain a feature of the 2014 operating environment.

• The revenue environment is expected to remain challenging.

• Regulatory reform will continue to have an impact on the industry, particularly as it relates to the non-convergence of rules at the country level.

• Banks are likely to face significant repercussions and fallout from prior years’ misconduct.

Nevertheless, in general, management appear to view the ongoing challenges as more manageable than they were one year ago.

• They are working to simplify their businesses, which should help generate sustainable cost savings.

• They are investing in digital capabilities and in selected emerging markets, which they believe will drive future revenue growth.

• They have built, and intend to maintain, strong capital buffers to ensure they can comfortably comply with endpoint requirements.

• They have de-risked their businesses, leading to a marked improvement in credit costs for some.

• They expect loan growth to resume in the coming year.

• They continue to sell non-strategic assets and enhance their focus on core businesses.

• They see improving economic trends in key markets.

While progress against objectives and an increasingly positive outlook was not uniform across the industry, it was evident across regions.

• In the US, Bank of America CEO Brian Moynihan said, “2013 was a significant year for the progress that this company has made against all of [our] focus areas. As we look to 2014, we are well-positioned as a company to meet our customers’ needs by delivering the whole company to every client and every customer, and winning in the marketplace.”

• In France, Crédit Agricole CEO Jean-Paul Chifflet stated, “We are looking to the future with confidence. The risk profile has been reduced. We have refocused on our fundamentals and our capital structure is very solid. And so, we are ready to start a lasting development phase.”

• And, in the UK, Barclays CEO Antony Jenkins said, “Barclays is a very different and more positive place than 12 months ago, and 2014 will be a pivotal year in the transformation we are undertaking. We have invested considerably in that transformation, and in the months to come, we will see many more benefits of that investment starting to flow through.”

“While we wouldn’t characterize the last two years as a normal cyclical environment … it shouldn’t be lost on us that the long-term trend is slowly and steadily improving.”

Harvey Schwartz, CFO, Goldman Sachs


Top 10 themes: 4Q13 earnings season

4Q13 3Q13

Rank Earnings season top 10 themes (arranged from most common to least common) — 31 banks

Rank Earnings season top 10 themes (arranged from most common to least common) — 35 banks

1.1 Quarterly earnings performance 1.1 Quarterly earnings performance

1.2 Expense trends and investments in the business

1.2 Expense trends

1.3 Capital strength and plans 1.3 Capital strength and plans

4.1 Regulatory and compliance 1.4 Macroeconomic environment

4.2 Cross-border and location strategies 5.1 Regulatory and compliance

6.1 Credit quality trends 5.2 Lending trends

6.2 Lending trends 5.3 Cross-border and location strategies

8.1 M&A and divestment strategies 8.0 Credit quality trends

8.2 Channel strategies 9.1 M&A and divestment strategies

10.0 Conduct issues 9.2 Conduct issues

Note: Theme shaded in gold is new to the list this quarter; theme shaded in dark grey dropped out of the top 10.


Key themes overview

Theme 1.1: Quarterly earnings performance — record highs, record lows and everything in-between 4Q13 earnings reports ranged from record profits to record losses. In 4Q13, descriptions of earnings performance ranged from “outstanding” at Wells Fargo to “solid” at UBS to “not as good as we would have liked” at Standard Chartered. A wide range of non-recurring items continued to obscure underlying business strength across the industry. Charges for litigation, restructuring, asset sales or own debt valuations in either the current or previous quarters made year-over-year and linked quarter comparisons complex. While certain of these items cannot be predicted, management at a growing number of banks expressed an expectation that significant non-recurring impacts related to restructuring will diminish over time.

• Iain Mackay, Group Finance Director, HSBC: “I would actually say there are many, many fewer notable items in these numbers than had been the case in 2012 or 2011, largely as we’ve moved to the latter stages of reshaping the business under the strategy. … We’ve got a set of numbers here that are beginning to migrate to something that looks more like normal.”

• Javier Marín Romano, CEO, Banco Santander: “The year’s profit was not impacted by capital gains, which were all assigned to restructuring costs, and to strengthen the balance sheet. This represents a first step towards normalizing the group profit.”

Twenty-four of the banks included in this analysis that disclosed quarterly earnings reported a net profit in 4Q13.* Of these, nine increased net earnings from both 4Q12 and 3Q13.

• In particular, Americas-based retail-focused banks displayed earnings strength. Wells Fargo, Toronto-Dominion Bank, Bank of America, US Bancorp and Banco Itau all reported increased net income from both prior periods.

• State Street, Nomura, Banco Santander and UBS also grew 4Q13 net income from both prior periods. While the absence of charges from 4Q12 contributed to this, management at each of these banks also highlighted positive performance trends in each of their core business units.

Six banks reported net losses in 4Q13, largely driven by significant charges for provisions, litigation and restructuring.

• Unicredit reported a net loss of €15 billion, due to a €9.3 billion goodwill impairment and €7.2 billion in additional provisions. Revenue trends were positive, however, with increases of 5% and 6% from 4Q12 and 3Q13, respectively.

• Royal Bank of Scotland reported a net loss of £8.9 billion, driven by impairment charges, legal expenses and a goodwill write-down. Revenues across all divisions were down 19% from both 4Q12 and 3Q13.

• Lloyds Banking Group’s net loss for the quarter came to £1.1 billion, but management highlighted improved underlying profitability for the full year, “Profits increased both in the group and in our core business, with group underlying profit more than doubling to £6.2 billion, and core profits increasing 24% to £7.6 billion. And this improved profitability meant that despite additional legacy charges, we delivered the statutory profit before tax of £415 million for the year.”

• Deutsche Bank’s €965 million net loss for 4Q13 reflected the impact of charges for litigation and costs to achieve, or, as Co-CEO Anshu Jain said, “The core bank underlying profit was €1.3 billion. However, we saw a total of €2.5 billion of profit and loss impacts arising predominantly from implementation of our strategy.”

• Grupo BBVA reported a €677 million net loss, driven by the mark-to-market revaluation of its stake in China CITIC Bank Corporation Limited.

• Barclays reported a 4Q13 statutory loss after tax of £514 million. Group Finance Director Tushar Morzaria focused instead on annual performance, noting, “Barclays’ adjusted profit before tax was £5.2 billion on £28.2 billion of income, while statutory profit before tax was £2.9 billion. This is a resilient outcome in light of the significant transition Barclays is implementing.”

*Standard Chartered disclosed half-yearly income statement figures only.

“2013 was clearly a year marked by regulatory development and significant legal settlements; however, more importantly, also a year in which our businesses together and individually performed strongly.”

Marianne Lake, CFO, JPMorgan Chase


Net income, percentage change from prior quarters*

* Banks not included for the following reasons: 4Q13 net loss (BBVA, BCS, DB, LLD, RBS, UCG); 3Q13 net loss (JPM, LLD, RBS); 4Q12 net loss (BCS, CA, CBK, DB, LLD, RBS, SG, UBS, UCG); Nomura's net profit increased from ¥91 million in 4Q12 to ¥49.1 billion in 4Q13.

-76%

-66%

-14%

42%

125%

-13%

11%

-2%

105%

151%

10%

18%

7%

2%

33%

370%

-19%

-64%

-7%

-91%

-73%

-44%

-40%

-32%

-17%

-15%

-14%

-8%

-8%

-6%

-4%

0%

1%

2%

3%

6%

16%

28%

38%

54%

59%

434%

BNP

MS

BK

SG

CS

C

HSBC

CBK

RBC

CA

CIBC

AXP

STD

WFC

STT

USB

TD

ITAU

NOM

BAC

GS

UBS

ING

JPM

Change from 3Q13 Change from 4Q12


Theme 1.2: Expense trends — banks highlight simplification as a key strategic cost management measure

“I view cost as a strategic battleground for banks in the next decade. Those who control and get on top of it will be winners, and I intend Barclays to be in the vanguard of that group.”

Antony Jenkins, CEO, Barclays

Initiatives aimed at simplification and streamlining are expected to drive sustainable cost savings. Banks across regions continue to seek sustainable cost reductions. This focus, which is likely to be a permanent priority of the banking industry going forward, is driving numerous initiatives aimed at improving efficiencies and supporting long-term revenue growth. During the 4Q13 earnings season, management at a wide range of banks discussed efforts to simplify businesses and processes, reduce duplication and streamline operations. They also acknowledged the upfront costs associated with such initiatives, and provided examples of levers they could pull to offset expense growth in a revenue-challenged environment.

• John Gerspach, CFO, Citigroup: “Throughout 2014, there are going be repositioning costs that we take as we continue to streamline the operations. It’s not just about moving onto standard platforms. Once you move onto standard platforms, you want to standardize your processes across the globe. And so that is going to incur some level of repositioning as we move forward. And then we’ll continue to look at delayering and rationalization of management structure throughout our businesses.”

• Gord Nixon, CEO, Royal Bank of Canada: “We are committed to improving efficiency and productivity, particularly as we face a slower growth environment. For example, in early 2014, we will be launching a new mortgage origination system that automates and simplifies the end-to-end mortgage process to improve client response time.”

• Jay Hooley, CEO, State Street: “What we’ve done is structurally change the cost of delivering core services here. We’ve centralized and standardized and leveraged offshore locations, and now we are in that last leg of rebuilding the systems to make those processes even more efficient. And what you’ll see this year and next year is the wrap-up of that.”

• Anshu Jain, Co-CEO, Deutsche Bank: “We’ve simplified our technology environment, eliminating 1,200 technology applications, which represent 20% of our total. We’ve earmarked another 1,100 for decommissioning. The integrated asset management business is moving to a single IT system, which will allow us to eliminate around 100 such legacy systems. We’re buying smarter. We’ve cut our vendor base by nearly 20,000, which represents almost 25%, meaning that we get better deals and better quality.”

• Jean-Laurent Bonnafé, CEO, BNP Paribas: “Our second strategic axis of development is to simplify our organization and processes. This represents the “Simple” of our Simple & Efficient Plan. Our aim is to simplify the organization and the way the group functions by clarifying roles and responsibilities in order to accelerate decision making to the benefit of our clients and our employees.”

• Stuart Gulliver, CEO, HSBC: “We aim to deliver a further $2 billion to $3 billion of sustainable savings by streamlining our processes and procedures without compromising our commitment to compliance in Global Standards. We’ll achieve this by taking advantage of the considerable scope within the business to globalize and simplify many of our operations and practices.”

• Simon McNamara, Chief Administration Officer, Royal Bank of Scotland: “What we’ve done over the last three or four months is take our portfolio of 505 projects and actually focus it around [the group’s] objectives, and we’re now running with a portfolio of less than half that, 250 projects. That’s probably still bigger than we’d like and, in fact, we have an objective of reducing that number further going into next year. … So, in the process, we’ve stripped out duplication. By the way, it’s worth pointing out that this doesn’t represent a reduction in investment. What this actually represents is a focusing of investment. It’s exactly the same investment figure going into this year as we had last year but now around fewer moving parts. That allows us not only to simplify, but also to focus our best resources on, this program … and, in the process, also increase the probability of success.”

• Federico Ghizzoni, CEO, Unicredit: “In terms of cost, we cut almost €2 billion. … We’ve done a lot in terms of simplification of the structure. So this reduction of cost is sustainable because the organization has been changed. It is much simpler. We moved from a divisional approach to a regional approach. We have simplified the structure in each and every country. If you take Italy [as an example], between the branch and myself, we have only three layers now. So, a very flat organization.”

Key expense levers cited in 4Q13

Headcount reductions BAC, BCS, ING, RBS, SG, STAN, ING, UCG

Supplier/vendor management DB, LLD

Real estate footprint BAC, BK, C, NOM, UCG

Repace investments C, RBC


Revenues and expenses, percentage change from 4Q12

*Standard Chartered disclosed half-yearly income statement figures only; not comparable to quarterly figures reported by other banks.

-19%

-16%

-9%

-9%

-6%

-6%

-5%

-5%

-4%

-3%

-2%

-2%

-1%

-1%

1%

1%

2%

2%

5%

5%

5%

5%

6%

9%

10%

12%

13%

15%

19%

20%

10%

-34%

-8%

1%

0%

-6%

-5%

6%

0%

23%

-22%

-3%

-13%

2%

-1%

6%

-27%

2%

10%

-8%

-2%

7%

8%

7%

-4%

29%

8%

-6%

15%

1%

RBS

DB

HSBC

STD

BBVA

WFC

CBK

GS

USB

BCS

NOM

JPM

C

BK

STT

CIBC

UBS

BNP

ITAU

AXP

LLD

UCG

RBC

CS

CA

MS

SG

BAC

TD

ING

Expenses Revenues


Theme 1.3: Capital strength and plans — banks plan capital cushions in excess of regulatory requirements

“The Basel III regulation is now well-known. The basic requirement is 7% for everybody. There is a global systemically important financial institution (G-SIFI) surcharge that, in our case, amounts to 2%. The upper category is at 2.5% … and so, for the biggest banks, the target will be 9.5%. We believe that, in practice, no bank can afford to be less capitalized than the biggest one. … 9.5% will become the minimum for everybody.”

Jean-Laurent Bonnafé, CEO, BNP Paribas

Banks target internal capital buffers to “future-proof” their businesses against evolving definitions. During 4Q13, banks reported Basel III Common Equity Tier (CET1) ratios* that exceed regulatory guidelines as they are currently understood. End-point requirements remain uncertain as European banks brace for the impact of the upcoming asset quality review (AQR) and stress tests, and regulators in some countries — most notably the US and the UK — are still working to define the local application of capital rules.

• Peter Sands, CEO, Standard Chartered: “It is crucial to understand that capital requirements will differ for each bank. This is the new regulatory model. The Prudential Regulation Authority’s (PRA) Pillar 2A guidance is different. G-SIFI buffers are different. Countercyclical buffers and CET1 capital requirements will be different to reflect each bank’s unique business model and risk profile. Capital requirements are not uniform, nor should they be. As recent periods have demonstrated, there are variances in the end-state capital levels, with targets ranging from about 10% to 12% or above.”

• Marianne Lake, CFO, JPMorgan Chase: “We would be willing to run between 10% and 10.5%, so we’re on a journey here. We think we can get to 10% plus or minus by the end of the year. But, we think that at this point, based on what we know, running at that level of buffer or margin should be enough.”

• Riaz Ahmed, Group Head Insurance, Credit Cards, and Enterprise Strategy. Toronto Dominion Bank: “In terms of running the cushion, we’re already actually running a pretty substantial cushion, so we obviously think that puts us in a better position. … We do our own internal stress test of many different types to estimate what we ultimately think the cushion ought to be.”

• Tushar Morzaria, Group Finance Director, Barclays: “The Pillar 2A requirement represents the capital that UK banks need to hold to cover idiosyncratic risks not fully captured under Pillar 1. It is determined at least annually by the PRA in consultation with each bank as part of its capital adequacy assessment and resulting capital guidance to each bank. … I expect that we will always operate with a certain level of management buffer above regulatory minimums, recalibrating it alongside the PRA’s individual capital guidance. We would not, however, expect it to be greater than the 150 basis points in our current plans. Once the combined buffer requirements are fully phased in, and we’ve decided on the appropriate calibration of the management buffer, we might be looking at an end-state ratio in the 11.5% to 12.0% range.”

Basel III CET1 ratios,* 4Q13

* Fully loaded CET1 ratios; US banks’ Basel III CET1 ratios are calculated under the US Federal Reserve’s standardized approach (AXP, BK, GS, JPM, STT, USB) or advanced approach (BAC, C, MS, WFC).

8.6 8.8 9.0 9.0 9.2 9.3 9.3 9.4 9.4 9.4

9.6 9.7 9.8 9.8 10.0

10.0 10.1

10.3 10.3

10.3

10.5

10.5

10.6

10.8

10.9

10.9

10.9 11.2

12.0 12.2

12.8

RB

S

US

B

CB

K

TD

GS

BC

S

ITA

U

UC

G

CIB

C

JP

M

RB

C

DB

WF

C

BB

VA

BA

C

SG

ST

T

BN

P

CS

LL

D C

MS

BK ING

HS

BC

ST

AN

ST

D

CA

NO

M

AX

P

UB

S


Theme 4.1: Regulatory — global harmonization of rules seems increasingly elusive

“[In 2013], divergence across regulatory frameworks created uncertainty for our industry.”

Sergio Ermotti, CEO, UBS

Concerns about the fragmentation of the financial regulatory framework mount. During the 4Q13 earnings season, management discussed unfolding regulatory developments, including the US Federal Reserve’s final Volcker Rule and rules for supervising foreign banking organizations, the publication of global leverage rules by the Basel Committee on Banking Supervision (BCBS) and the European Banking Authority’s communication on the key features of the 2014 EU-wide stress tests. While progress on certain reforms was viewed as “welcome,” management expressed growing concern over the lack of harmonization of global rules.

• Douglas Flint, Chairman, HSBC: “What’s playing through at the moment in global regulation is while everybody stands up and embraces the concept of a single framework for regulation, what you’re seeing is increasingly, and for obvious reasons, the Balkanization of capital regimes to fit the particular shape of the markets where the regulators have, again understandably, a primary concern against their own political environment and their own taxpayer risk. So I think it’s very difficult. I don’t think you would get the recognition from a regulator anywhere around the world that what they’ve got a responsibility to do is to create or contribute to a level playing field … so I think we’re going to increasingly see differentials between markets, and that’s just life.”

• Michael Corbat, CEO, Citigroup: “As we look [across the international capital and liquidity regimes], some concerns that we’re focused on are around the concept of a level playing field, around harmonization. … When you operate in multiple jurisdictions, you’ve got an almost unlimited number of things you’re trying to solve for.”

• Stephan Engels, CFO, Commerzbank: “The year 2014 will see an increasing number of releases of technical standards from the European Banking Authority (EBA), which may not, in all cases, be totally comparable or totally equal to what has been done on the local authority level before.”

• António Horta Osório, CEO, Lloyds Banking Group: “I strongly believe that with the increased regulatory uncertainty and the non-convergence yet of standards globally, the fact that you are in multiple jurisdictions increases your regulatory risk. So I think that’s one of the key advantages of [our June 2011] strategy of simplifying the bank, not only in terms of reshaping, but in terms of legal entities. We had more than 1,700 legal entities, … We [now] have less than 1,000 legal entities. We exited 21 countries, so I think that decreases significantly our regulatory risk.”

• Peter Sands, CEO, Standard Chartered: “In addition to the issues specific to our markets, we face some broader challenges. One is the ongoing torrent of regulatory change. The Basel III agenda is nearing completion, which is a considerable achievement and one we welcome. But it risks being undermined by a profusion of unilateral initiatives and interpretations.”

• Federico Ghizzoni, CEO, Unicredit: “For us, the banking union — if fully implemented — will mean quite a lot in term of managing our capital. So, internal allocation of capital should become less strict, so we should have more freedom. I’m using “should” because it’s not yet clear what the balance between the main regulators of Frankfurt and the local regulators will be.”

As the regulatory reform agenda advances, banks are facing an increased burden in the area of compliance.

• Georges Chodron de Courcel, Deputy Managing Director, BNP Paribas: “In Corporate and Investment Banking, there is an increase of the cost of doing business — regulation, audit and so on — and unfortunately, we suffer from that as do all the other banks.”

• Anshu Jain, Co-CEO, Deutsche Bank: “We’re investing in more robust controls, around €1 billion to meet regulatory challenges. This will include the hiring of around 100 additional compliance personnel.”

• Tom Naratil, CFO, UBS: “We’ve made the achievement of the CHF2.2 billion in gross cost savings in an environment of increasing regulatory requirements, increasing regulatory compliance, changes in structure, a lot of work being done there. So there’s a lot of increased spend that actually is a headwind to the cost savings.”

• Harvey Schwartz, CFO, Goldman Sachs: “At this stage, [the Volcker Rule] doesn’t look like a revenue-impacting item, but of course, we jettisoned businesses early on in the process and made changes. … With respect to the compliance costs that I mentioned, it’s too early to quantify, but there’s a pretty extensive compliance regime.”

• Jay Hooley, CEO, State Street: “I would have thought two years ago that we would be declining our investments in these kinds of things, but it’s not happening that way. A simple example that highlights some of my frustration and some of the cost is, if you look at the Volcker Rule, which for a firm like State Street does not have a significant impact, yet the [reporting] systems we’re building to prove that [our trading] is not proprietary are just mind-blowing.”


Theme 4.2: Cross-border strategies — banks continue to see opportunities in emerging markets

“We believe the deceleration of growth in Asia has bottomed out. … Our projections for key markets such as Mexico, India and Korea call for improvements over 2013 levels.”

Michael Corbat, CEO, Citigroup

Banks continue to allocate resources to emerging markets, despite recent concerns about slowing growth. As Standard Chartered CEO Peter Sands observed, “Investor sentiment towards emerging markets turned sharply from May last year, and remains quite negative and jumpy. At least as far as our markets are concerned, we think this is a quite short-term, somewhat over-blown phenomenon. The longer-term attractions of Asia, Africa and the Middle East remain compelling.” Based on comments during the 4Q13 earnings season, management at other banks appeared to share his view. While Asia-Pacific was most frequently mentioned as a primary target market by Western banks, Central and Eastern Europe (CEE) and Latin America also emerged as key markets of interest.

• Harvey Schwartz, CEO, Goldman Sachs: “Importantly, it’s not about any individual region, but it’s the connectivity across our businesses, and an ability to connect, for example, our Investment Banking clients with resources in Institutional Client Services, where we can deliver solutions globally. In Asia, people are looking to raise capital, and they want to go to US investors. That’s really where you get the synergistic leverage across the enterprise.”

• Jeffrey Campbell, CFO, American Express: “Longer term, we think it’s really important that we establish as large a presence as we can in China, and we have a number of different business things that we’re doing in China.”

• Tom Naratil, CFO, UBS: “UBS is the largest wealth manager in Asia, and this region is a key source of growth for our business.”

• Brady Dougan, CEO, Credit Suisse: “Going forward, we will remain focused on improving the profitability of Private Banking & Wealth Management by growing in emerging markets.”

• Shigesuke Kashiwagi, CFO, Nomura: “We recently announced the acquisition of ING Group’s asset management subsidiary in Taiwan to further expand our footprint in Asia.”

• Roberto Egydio Setúbal, CEO, Banco Itau: “We are still looking to be in other countries in Latin America too, where we are not at this point in time, such as Peru and Mexico. … We believe that we should pursue our strategy of becoming a regional bank. So we would like to have a presence and stronger position in more markets in Latin America before we think about going to other markets.”

• Jean-Laurent Bonnafé, CEO, BNP Paribas: “Let’s start then with the geographical plan, beginning with Asia-Pacific. This plan was presented at the beginning of 2013. The group is already one of the best positioned non-Asian banks in the region. As you may remember, our aim is to boost our Corporate and Investment Bank (CIB) and Investment Solutions divisions to over €3 billion by 2016. The good news is that we made significant progress in that direction already in 2013. And, in fact, our revenues increased by over 24% to approximately €2.5 billion by year-end 2013.”

• Federico Ghizzoni, CEO, Unicredit: “We strongly believe that in the medium term, CEE is still a good place to be. Why? Because in term of banking penetration it is very low compared to Western Europe … loans to GDP is 56% in CEE, while it’s 105% in Western Europe. So, it’s underpenetrated. The profitability is higher, profit before taxes on loans, 1.4% versus 0.7% in Western Europe. But then, what is interesting, is that CEE is changing. It is becoming a region in which customers are starting to have much more need for sophisticated products, especially on the corporate side.”

• Stuart Gulliver, CEO, HSBC: “Overall, we remain optimistic about the longer-term prospects of the emerging markets, and especially the opportunities for HSBC, which will arise from the anticipated material expansion in South-South trade and capital flows. In the short term, we stress the importance of differentiating within and between individual countries within the generic category of emerging markets.”


Theme 6.1: Credit quality trends — lower credit costs are not yet a universal feature of the sector Credit costs have stabilized or improved in most countries, but not all. In the past few years, considerable efforts have been made across the banking industry to de-risk, boost provisions and refocus on risk management. As a result, most banks believe to have moved past the worst of the post-crisis credit quality issues, based on current conditions. In North America, and particularly the US, improvements to credit losses may bottom out in the foreseeable future, putting an end to what has been a strong earnings tailwind for a number of quarters. Banks in other countries are varying stages of the credit improvement cycle.

• Brian Moynihan, CEO, Bank of America: “On our credit costs and provision costs, we’ve seen tremendous results, as net loss rates in our portfolio are at levels not seen in nearly a decade.”

• Jeffrey Campbell, CFO, American Express: “Overall, our credit metrics remain at all-time low levels. … Our objective is not necessarily to have the lowest possible write-off rate, but is instead to achieve the best economics when we make investments. Therefore, at some point, we would expect that lending write-off rates will increase from today’s historically low levels.”

• Tushar Morzaria, Group Finance Director, Barclays: “Credit metrics are strong and credit risk loans continue to fall as a percentage of loans, and the CRL coverage ratio continued to improve despite the reduction in total impairment allowance. The overall outlook remains benign, with most delinquency statistics either improving or broadly stable.”

• Javier Marín Romano, CEO, Banco Santander: “2013 was another year of large provisions by the group, mainly because of Spain. We assigned €11 billion to loan loss provisions, and we also improved the coverage ratio of our loan portfolio to 4.3% from 1.5% at the start of the crisis. The provisions made in 2013 implied a cost of credit of 1.53% which, though still high compared to the average of the cycle, has begun to normalize. The trend will definitely continue during the next quarters.”

• Roberto Egydio Setúbal, CEO, Banco Itau: “Provisions are declining, so this shows the improvement that we are having. When we look at the short-term NPLs, we can see that it’s already at a stable level. And again, it’s the lowest level since the merger with Unibanco. And we can see clear improvements coming still on the consumer side, although on the company side we had some deterioration here at this quarter. We don’t see this as a trend. This small deterioration that we had in this quarter was due to a few clients that went past due in the quarter.”

• Philippe Bordenave, Co-COO, BNP Paribas: “The cost of risk increased by €113 million versus 2012. This increase … is coming entirely from BNL, our Italian retail activities where the cost of risk grew by €244 million given the prolonged recession and sharp recession in Italy. All the other parts of retail here are managing to keep their cost of risk stable, or even to decrease it.”

• Wilfred Nagel, Chief Risk Officer, ING: “[On the outlook for loan loss charges], that is a bit of a science but more an art. What we’re seeing on one hand is a number of indicators that the economic environment in most of the countries in which we operate is improving. So that would lead us to say that in those areas, we would expect a decline at some point. We’ve indicated in the past that there’s always a time lag between an economic development and what shows up in our loan losses. That was the case going into the crisis and, it will be the case coming out of the crisis. So I don’t expect this to take off rapidly, but we do think that on a number, particularly of the international activities, i.e., those outside the Netherlands, we will see an improvement.”

• Stefan Krause, CFO, Deutsche Bank: “Our provision for credit losses was at €689 million in the fourth quarter, an increase of €177 million from the previous quarter. The quarter-on-quarter increase in the Private and Business Clients segment largely reflects regular recalibrations, as well as single-client events in the German and Spanish portfolios.”

• Federico Ghizzoni, CEO, Unicredit: “We worked almost three months in order to reach the €7.2 billion additional provision. … We, first of all, reviewed one-by-one almost entirely the portfolio of impaired loans, moving roughly 50% of restructured loans and doubtful to NPLs. So we have reclassified the customers, consequently increasing the provisions.”

Potential impact of Asset Quality Review (AQR)

During the European banks’ earnings conference calls, analysts sought to understand whether the European Central Bank’s upcoming AQR would require significant increases in provisions.

In the few cases when management specifically addressed this issue, they largely downplayed the potential negative impact, reflecting the stance of Commerzbank CFO Stephan Engels, “From our point of view, our portfolio is valued and priced correctly and adequately. So we do not expect to have any additional provisions

with respect to the AQR.”


Theme 6.2: Lending trends — modest lending growth expected in 2014 Outlook for positive lending trends in 2014 is evident across regions. Management across the US and Europe expressed their belief that loan growth will resume in 2014, most likely in the second half of the year. The level of conviction on lending prospects was linked to economic growth forecasts for individual countries, with stronger optimism in the US, an improving outlook for the UK and Spain and a cautious stance in France and Italy.

• John Stumpf, CEO, Wells Fargo: “I think there will be some loan growth at the industry level. I’m much more confident about our ability to grow loans just based on what we’ve done in this past quarter. But I will tell you, I’m hearing more, when I talk with customers, about their interest in building something, adding something, investing in something. So there is more activity going on. I wouldn’t say it’s going to be a watershed moment, but I’m optimistic about the economy. I mean we sit here this January as an economy and, frankly, as a company in better shape than I’ve sat here in the last five or six Januarys, so yes, I’m guardedly optimistic about the industry and optimistic about our company being able to grow loans and, over time, grow revenues.”

• Jamie Dimon, CEO, JPMorgan Chase: “We didn’t use the word cautiously optimistic. We’re using the word optimistic, because we are actually optimistic. And when you have the US economy starting to grow, you will see loan growth and volume growth.”

• Javier Marín Romano, CEO, Banco Santander: “We expect loan growth in 2014. This is new. You remember that last quarter our view was more stagnant, it was more a reduction in credit in 2014. Our expectation now is for a small increase in loans in 2014.”

• Ángel Cano Fernández, President, Grupo BBVA: “In 2014, we’re going to have to separate or differentiate between [lending to] business and individuals. For individuals, I don’t think we’re going to see any growth year-on-year in the balances. … On the other hand … talking about loans to companies … I’m not sure whether it’s going to be 2%, 3% or 4%, but there’s going to be positive growth in lending to companies.”

• António Horta Osório, CEO, Lloyds Banking Group: “We have grown core loans and advances by £12 billion or around 3% against the market, which has fallen by 1%. We expect to continue to grow in 2014, with special emphasis on the SME sector. … For our retail customers, we returned our core loan book to growth in the year, and we expect to continue to grow our core mortgage book in 2014, consistent with a stronger market.”

• At BNP Paribas, Deputy Managing Director François Villeroy de Galhau observed that in the bank’s Domestic Markets segment, lending was down in 2013 due to low demand. In Belgium, however, loans grew slightly. “Here the economic growth is stronger than the Eurozone average, which helps us to achieve not only growth in deposits, but also 1.7% growth in loans.”

• Federico Ghizzoni, CEO, Unicredit: “In the Italy Commercial Bank, excluding corporate and investment banking, in term of loans growth, we foresee a combined annual growth rate (CAGR) for the five years of the plan of 4.5%.”

Net loans*, percentage change from 4Q12

* End of period net loans not reported by BK, GS, MS, NOM and STT.

-12% -9%

-8% -7% -5% -5% -5% -4% -4% -4%

-2%

1% 1% 1% 2% 3% 3% 3% 3% 4% 4% 6%

8% 8% 9%

13%

CB

K

RB

S

UC

G

ST

D

BB

VA

DB

ING

LL

D

SG

CA

BN

P

BC

S

CIB

C

JP

M CS

UB

S C

AX

P

BA

C

WF

C

ST

AN

US

B

RB

C

HS

BC

TD

ITA

U


Theme 8: M&A strategies — asset sales reflect new rules and focus on core businesses

“We’ve taken a number of steps over the past several years in terms of selling businesses that, because of rule changes, were quite frankly just better held in other people’s hands.”

Harvey Schwartz, CFO, Goldman Sachs

M&A strategies continue to be weighted towards divestments. European banks that commented on the potential for acquisitions stated a clear preference for organic growth, reflecting efforts to reinvest capital in existing core businesses. In contrast, in North America and Japan, management comments indicated a stronger appetite for acquisitions, particularly in the area of wealth management, as highlighted at CIBC, Royal Bank of Canada, Goldman Sachs and Nomura. Similar to trends in recent quarters, banks reported more activity in selling assets. Divestitures continue to be driven by the combination of evolving regulations and efforts to refocus on core businesses.

• Philippe Bordenave, Co-COO, BNP Paribas: “We are in a new world. External growth is not in fashion. … We are not excluding small acquisitions in order to accelerate organic growth in the businesses in a bolt-on way, but they are going to be marginal in the overall landscape.”

• James Gorman, CEO, Morgan Stanley: “We announced late last year that we are selling our Global Physical Oil business. This will be done in two parts. The first is the transaction we announced with Rosneft, which included the sale of our Oil Merchanting business. The second component is our intention to explore strategic options for our stake in TransMontaigne.”

• Jamie Dimon, CEO, JPMorgan Chase: “Every year, we try to have a disciplined approach about what we stay in and what we don’t. And I think we probably were more disciplined this year about the things we don’t need from [the perspective of] de-risking, capital, management focus, controls, etc. If you look at the prepaid card business, we’re not dealing directly with customers; it’s secondary, it’s a complex business and we’re just better off letting someone else do it.”

• Ángel Cano Fernández, COO, Grupo BBVA: “We have just closed all the divestments selling off the pension business in Latin America. We got out of Panama. With that, we can improve our ability to focus on our core business in the region.”

• Credit Suisse sold several private equity assets out of its non-strategic unit for Private Banking and Wealth Management. It also announced the sale of its Private Banking business in Germany as it seeks to “reallocate resources to growth areas.”

• Ralph Hamers, CEO, ING: “Since the last results call, ING made further progress on the divestment of the Insurance units. The divestment of Insurance Asia is now resolved. And the sales of the two stakes in SulAmerica are closed as well.”

• Jean-Paul Chifflet, CEO, Crédit Agricole: “In 2013, we were successful in our refocusing. … We’re also going to divest Crédit Agricole Consumer Finance in Sweden, Denmark and Bulgaria.”

• Peter Sands, CEO, Standard Chartered: “On [the sale of the Swiss private bank], this is just not a very good bit of our private bank. It’s an underperforming bit of our private bank. We don’t think we need a Geneva booking center as part of our proposition. We’re not majoring in being a Swiss private bank. That’s not why people will come to put their money with us.”

While asset sales are strategically necessary, and drive improvements in risk-weighted assets (RWA), capital and costs, they also represent lost revenues for banks. During the 4Q13 earnings season, HSBC CEO Stuart Gulliver referred to this specifically; “Bear in mind, we’ve sold 63 businesses. … We sold an awful lot of revenue. So when you actually look at the revenue numbers and say, well, there’s no revenue growth there, people aren’t really considering the fact that we actually sold substantial amounts of revenue as we sold businesses that were not strategically logical, portfolios of assets that failed the six filters. Obviously, we have released RWA through this, which we’ve been able to redeploy in growing revenues that are logical within in our [four core] businesses, which logically should actually have a higher valuation.”


Theme 9: Channel strategies — digital investments address changing customer behavior

“In retail, the rule of the game is to reduce the cost to serve and increase revenues. … [This requires] investments, first of all, in redesigning our branch network; we need the new format, more flexible branches. We need to invest in multichannel. We need to invest in big data management. This is key looking forward.”

Federico Ghizzoni, CEO, Unicredit

Banks prioritize investments in digital offerings and explore new branch formats. During the 4Q13 earnings season, management at banks across regions addressed plans to invest in digital applications, while also optimizing their physical branch networks. Strategies in this area are ostensibly driven by changing customer behavior, but they also address the need to both sustainably reduce costs and develop new revenue sources. Given that many banks are still in the early stages of executing their mobile strategies, strong evidence of revenue growth has not yet materialized.

• John Stumpf, CEO, Wells Fargo: “We’re making a lot of investments in technology, as customers are interested in mobile and other ways to access us. We still believe that stores are important, and we believe that because our customers tell us that. We have the “Neighborhood Branch” pilot, and we are assessing that. We will build stores this year. I don’t think there will be a significant net increase because sometimes we build a new one, and we consolidate one or two into that. But most of the investments we’re going to make will be in areas of product and convenience for customers.”

• Michael Pederson, Group Head of US Banking, Toronto-Dominion Bank: “In the distribution system of the future, and with all our investment in mobile, online and so on, stores will have a slightly different purpose. … The stores we’re opening this year are about 35% smaller in terms of square footage compared to stores we’ve opened in the past.”

Selected digital metrics, as disclosed by management

BAC In 4Q13, 9% of all the checks deposited by consumers went through iPads and mobile phones. That was up from 7% in 3Q13.

BAC We have put $500 million in the online mobile platform over the last three or four years and we'll continue to invest at that rate."

BNP Promising start [for Hello Bank!] ... 177,000 customers. It's in line with our expectations of 1.4 million for 2017.

CIBC More than 1 million active clients.

HSBC Rolled out mobile applications across 25 key markets, with 2.5 million downloads in 2013.

LLD Net new Internet banking users of over 750,000 in the last 12 months; over 4 million mobile banking users.

RBS 1.4 billion logins.

UCG Mobile banking, for example, we are the number one in Italy with 27% market share.

• Ángel Cano Fernández, COO, BBVA: “What remains to be done is to continue our analysis of our distribution model

to look at the branch network and the productivity and the profitability of each of the branches. … With everything that’s been invested in technology — not just in the back end but also the front end, all the digital transformation that we’re going to roll out and the different kinds of customers that we’re focusing on — this will have an additional impact on costs. It will have a negative impact on cost during 2014, and even more so in 2015.”

• François Villeroy de Galhau, Deputy Managing Director, BNP Paribas: “We announced, last March, the so-called Bank for the Future plan — an adaptation of our network and workforce to the new behavior of our customers, including a decrease of the number of branches in Belgium. We are completely on track implementing this plan. We are also on track in developing our digital offering, ‘Hello Bank!’ in other countries, and also on a promising evolution of our e-wallet called Sixdots or Belgian Mobile Wallet (BMW). We were the first to create this wallet at the beginning of 2013, and we were joined by all the other Belgian banks at the end of last year.”

• António Horta Osório, CEO, Lloyds Banking Group: “The next phase of our journey now that we have substantially finished the reshaping and strengthening of the bank is to grow, taking advantage of the economic recovery, and of the reorganization of the business achieved over the past 2.5 years. Going forward, digital technologies will increasingly be a key development area across all our brands. And that’s why I have reorganized the bank, making digital a group-wide function reporting directly to me.”


Theme 10: Conduct issues — banks grapple with elevated legal expenses and the need to restore trust

“A big challenge that affects the entire industry is to rebuild trust and credibility. Put bluntly, society expects more of us. We must raise the bar on conduct so that every employee looks to comply with the spirit, not just the letter, of the laws and regulations in everything they do.”

Peter Sands, CEO, Standard Chartered

Banks continue to deal with fallout from past years’ misconduct. During the 4Q13 earnings season, banks addressed the consequences of prior years’ misconduct related to a range of issues, including mis-sold products, LIBOR manipulation, questionable pre-crisis mortgage securitization and lapses in controls, among others. These issues have impacted banks in a number of material ways — elevated legal expenses, higher provisions for customer redress, revised compensation practices and increased operational risk-related RWAs in the US. In addition, conduct is becoming a key feature of banks’ strategic planning, particularly in the UK, where Barclays and Standard Chartered have set goals of becoming the “Go-To Bank” and “Here for Good,” respectively, and HSBC has established a Global Standards Committee. Conduct issues are likely to be an ongoing focus for banks around the world as they continue to work to resolve legacy issues, restore trust with customers and comply with heightened supervisory standards for consumer products.

• Anshu Jain, Co-CEO, Deutsche Bank: “We cannot talk about the very high costs that we are paying for the legacy mistakes that we’ve made without being utterly committed to a culture which ensures that we don’t wind up with new problems. Culture is not something which you can change overnight.”

• Ross McEwan, CEO, RBS: “It’s clearly our vision to build a bank that earns your trust because it’s clear in this industry that there’s no trust left in banking, and we’re certainly at the bottom of that pile from a sector perspective.”

• Tom Naratil, CEO, UBS: “We continue to be exposed to a number of claims and regulatory matters, and we still expect related charges to remain at elevated levels through 2014.”

• Frédéric Oudéa, CEO, Société Générale: “It’s my conviction that we need to think that the banking industry will have litigation risks going forward. I think that it’s part of the business at least for the next two to three years.”

• Stuart Gulliver, CEO, HSBC: “We’ve introduced new incentive plans for Retail Banking and Wealth Management globally, which removed the formulaic link between product sales and variable pay. We therefore expect future revenues to be of a higher quality with lower risk of customer redress.”

The significant legal matters facing the industry also impacted RWA, as several US banks reported higher operational risk RWA.

• John Gerspach, CFO, Citigroup: “[The increase in operational risk RWA] was driven by the higher level of litigation-related activity throughout the industry. It’s much more of an assessment of what’s going on in the industry. When we take a look at operational risk in our various businesses, we have to look both at ourselves, but also at the industry as far as measuring the type of operational risks that our businesses face. So it’s very much our view as to what’s happening not just with us, but with the industry.”

• Ruth Porat, CFO, Morgan Stanley: “We’ve been reducing risk-weighted assets within Fixed Income. But the reason there’s an addition [to RWA] is that a key component of the calculation is operational risk, which captures litigation.”

Selected banks, 4Q13 legal expenses, local currency millions

BAC $2,300

BNP €798

C $809

CS CHF 473

DB €528

GS $561

JPM $800

MS $1,200

UBS CHF 79


Appendix

Summary of key banking sector themes 4Q13 earnings season

This table provides a summary of the top 10 themes.

Top initiatives and issues (arranged from most common to least common)

AXP ITU STD BAC BK BCS BNP CIBC C CBK CA CS DB GS BBVA HSBC

Quarterly earnings performance

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Expense trends and investments in the business

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Capital strength and plans

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Regulatory and compliance

29 √

√ √ √ √ √

√ √ √ √ √ √ √ √

Cross-border and location strategies

29 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Credit quality trends 25 √ √ √ √ √ √ √ √ √ √ √

√ √ √

Lending trends 25 √ √ √ √ √

√ √ √ √ √ √

√ √

M&A and divestment strategies

24 √ √ √

√

√ √ √ √ √ √

√ √ √

Channel strategies 23 √

√ √ √ √ √ √ √ √

√ √

Conduct issues 22 √

√ √ √ √

√

√ √ √

√

Legend

AXP — American Express ITAU — Banco Itaú STD — Banco Santander BAC — Bank of America

BK — BNY Mellon BCS — Barclays BNP — BNP Paribas CIBC — Canadian Imperial Bank of Commerce

C — Citigroup CBK — Commerzbank CA — Crédit Agricole CS — Credit Suisse

DB — Deutsche Bank GS — Goldman Sachs BBVA — Grupo BBVA HSBC — HSBC Holdings


Summary of key banking sector themes (contd) 4Q13 earnings season

This table provides a summary of the top 10 themes.

Top initiatives and issues (arranged from most common to least common)

ING JPM LLD MS NOM RBC RBS SG STAN STT TD UBS UCG USB WFC

Quarterly earnings performance

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Expense trends and investments in the business

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Capital strength and plans

31 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Regulatory and compliance

29 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Cross-border and location strategies

29 √

√ √ √ √ √ √ √ √ √ √ √ √

Credit quality trends

25 √ √ √ √ √ √ √

√

√ √ √

Lending trends 25 √ √ √ √

√ √ √ √

√

√ √ √

M&A and divestment strategies

24 √ √ √ √ √ √ √

√ √

√ √

Channel strategies 23

√ √ √ √ √ √ √ √ √ √ √ √

Conduct issues 22 √ √ √ √

√ √ √ √ √ √ √ √

Legend

ING — ING Groep JPM — JPMorgan Chase LLD —Lloyds Banking Group MS — Morgan Stanley

NOM — Nomura Holdings RBC — Royal Bank of Canada RBS — Royal Bank of Scotland

SG — Société Générale

STAN — Standard Chartered STT — State Street TD — Toronto-Dominion UBS — UBS AG

UCG — Unicredit Group USB — US Bancorp WFC — Wells Fargo


Select KPIs

Market value (US$m) Assets (US$m) Capital

ratio

Basis of calculation for capital ratio

AXP 97,426.90$ 153,375.00$ 12.50 Basel 1 Tier 1 common capital ratio

BAC 189,592.30$ 2,102,273.00$ 11.19 Basel 1 Tier 1 common capital ratio

BBVA 69,785.70$ 825,960.32$ 11.60 Basel 2.5 Core Tier 1 ratio

BCS 64,882.60$ 2,172,627.48$ 13.20 Basel 2.5 Core Tier 1 ratio

BK 39,976.50$ 374,310.00$ 14.50 Basel 1 Tier 1 common capital ratio

BNP 97,431.00$ 2,480,213.56$ 11.70 Basel 2.5 Core Tier 1 ratio

C 152,491.00$ 1,880,382.00$ 12.60 Basel 1 Tier 1 common capital ratio

CA $ 39,878.90 2,117,488.29$ 12.60 Basel 2.5 Core Tier 1 ratio

CBK 20,405.60$ 757,317.44$ 13.10 Basel 2.5 Core Tier 1 ratio

CIBC 34,069.30$ 359,600.90$ 9.40 Basel III Common Equity Tier 1 ratio (all-in basis)

CS 49,964.30$ 981,223.43$ 10.30 Basel III Common Equity Tier 1 ratio

DB 45,723.20$ 2,271,975.75$ 12.90 Basel 2.5 Core Tier 1 ratio

GS 81,561.00$ 911,507.00$ 14.60 Basel 1 Tier 1 common capital ratio

HSBC 186,601.40$ 2,671,318.00$ 13.60 Basel 2.5 Core Tier 1 ratio

ING 54,784.10$ 1,487,590.00$ 11.70 Basel 2.5 Core Tier 1 ratio

ITAU 31,758.40$ 434,834.71$ 11.60 Basel II

JPM 227,626.10$ 2,415,689.00$ 10.70 Basel 1 Tier 1 common capital ratio

LLD 93,576.50$ 1,402,367.55$ 14.00 Basel 2.5 Core Tier 1 ratio

MS 64,782.30$ 832,702.00$ 12.80 Basel 1 Tier 1 common capital ratio

NOM 23,449.40$ 415,160.65$ 12.00 Basel III Common Equity Tier 1 ratio

RBC 92,552.30$ 811,402.69$ 9.60 Basel III Common Equity Tier 1 ratio (all-in basis)

RBS 57,397.40$ 1,701,784.77$ 10.90 Basel 2.5 Core Tier 1 ratio

SG 48,434.00$ 1,701,931.66$ 11.80 Basel 2.5 Core Tier 1 ratio

STAN 47,358.40$ 674,380.00$ 11.80 Basel 2.5 Core Tier 1 ratio

STD 103,807.40$ 1,537,114.91$ 11.71 Basel 2.5 Core Tier 1 ratio

STT 29,351.20$ 243,291.00$ 15.50 Basel 1 Tier 1 common capital ratio

TD 84,622.20$ 815,153.36$ 9.00 Basel III Common Equity Tier 1 ratio (all-in basis)

UBS 78,528.00$ 1,135,567.30$ 12.80 Basel III Common Equity Tier 1 ratio

UCG 52,527.90$ 1,165,387.16$ 10.57 Basel 2.5 Core Tier 1 ratio

USB 78,187.30$ 364,021.00$ 9.40 Basel 1 Tier 1 common capital ratio

WFC 257,988.20$ 1,527,015.00$ 10.82 Basel 1 Tier 1 common capital ratio

Source: SNL Financial and company reports. Notes: Market value as of 20 March 2014; assets as of 31 December 2013 for US banks and 31 October 2013 for Canadian banks.

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