Global Inves

Societe Generale (SG) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that SG 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. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S)

CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS AND THE STATUS OF NON-US RESEARCH ANALYSTS.

EQUITY

9 April 2015

Extract from a report

Global Investment Banks Global IBs: Positive quarter for trading but lack of capital is the key issue

Q1 should be a decent quarter JPM will kick off the global investment banks Q1 earnings season on 14 April. Q1 15 equity and FICC trading revenues in investment banking

are widely anticipated to be healthy (consensus = up mid-high single-digit percentage points

yoy), while advisory revenues should be stable. However, weak underwriting revenues, a low

interest rate environment, weak mortgage revenues (US), catch-up litigation expenses (EU)

would be key offsets. Importantly, we continue to see lack of adequate capital as a key

structural concern, exacerbated by continuing regulatory burdens (e.g. trading book review).

See here for our detailed report. Robust trading revenues in Q1 15 are therefore likely to be a

passing phase in a general downtrend. We reiterate our preference for business models that

are more diversified, well capitalised and have manageable regulation/litigation risks.

We are buyers of BAC, BARC, JPM and UBS. BAC has sold-off 13% YTD (vs down 3% for

BKX), and is particularly compelling given our forecast 16e ROTNAV of 11% vs P/16e TNAV

of 0.9x. BARC and UBS are attractive self-help restructuring stories in our view;

management should be able to improve ROTNAVs to drive a re-rating of P/TNAVs. JPM is

well placed to benefit from an improvement in the global macroeconomic environment, and

looks attractively valued on forward ROTNAV in our view.

We are sellers of CS, DBK and GS. CS, DBK and GS have weak capital adequacy in various

guises. We see capital deficits of CHF6.5bn at CS and 5bn at DBK to reach minimum

leverage ratio requirements. At GS, the CCAR/stress test has severely reduced buyback

capacity and therefore future EPS accretion (see here) We are also sellers of WFC given

slowing earnings growth and expensive valuation (click here for detailed report).

We update our EPS for several stocks. Please see page 4-6 for details. There are only

very modest changes to our EPS forecasts. There are no changes to our target prices or

recommendations.

Stock selection

Preferred

Bank of America Barclays JP Morgan UBS

Least preferred

Credit Suisse

Deutsche Bank

Goldman Sachs

Key recommendations

Company 07/04/15

Pricing Curr Reco

Target

Price 12m 12m

P/TVNAV ROTNAV P/E

ratio Comments

fcast div TSR 15e

Bank of America 15.46 USD Buy 19.0 0.20 24% 0.95 10.0% 10.9 Cleaner turnaround in profitability, RoTE to rise to to11% in FY15

Citigroup 51.52 USD Hold 55.0 0.16 7% 0.83 9.1% 10.0 EM growth risks and lower US exposure

Barclays 258

GBp Buy 320.0 8.00 27% 0.85 10.4% 8.4 Non-core run-off will move group towards cores 12% RoTE

Credit Suisse 26.85 CHF Sell 15.5 0.35 -41% 1.26 12.6% 10.5 Weak CET1 leverage ratio points to equity deficit. RMBS fines a concern

Deutsche Bank 33.15

EUR Sell 23.0 0.75 -28% 0.83 8.3% 10.1 Weak leverage ratio points to equity raise. Litigation for MBS mis-selling

Goldman Sachs 192.39

USD Sell 149.0 2.50 -21% 1.17 10.2% 11.6 Expensive. mRWA inflation concerns. Capital return policy under pressure

JP Morgan 60.85 USD Buy 69.0 1.72 16% 1.27 12.6% 10.6 Capital optimisation and expense savings are key areas of focus.

Morgan Stanley 35.94 USD Hold 37.0 0.55 5% 1.13 9.1% 13.0 Attractive WM strategy. Rally leaves little value in the stock though

UBS 18.75 CHF Buy 23.0 0.50 25% 1.55 16.3% 10.0 Great WM business. Litigation & leverage concerns should alleviate

Wells Fargo 54.02 USD Sell 51.0 1.55 -3% 1.93 15.7% 13.2 Slowing earnings growth/quality, rising credit costs, expensive valuation

Equity analyst Equity analyst Equity analyst Specialist sales

Murali Gopal

Andrew Lim

Anubhav Srivastava

James Lloyd

(91) 80 2803 7319 (44) 20 7676 6014 (91) 888 416 8685 (44) 20 7762 5426 [email protected] [email protected] [email protected] [email protected]

This document is being provided for the exclusive use of TONY TANAKA (JI-ASIA GROUP)

Global Investment Banks

9 April 2015 2



9 April 2015 3

Contents

Key SG bank sub-sector calls ............................................................................................... 4

Q1 15 earnings calendar ....................................................................................................... 5

Earnings estimates fine tuned; target price and rating remain unchanged ............................. 5

SG estimates versus consensus (Q1 15) ............................................................................... 6

Key recommendations .......................................................................................................... 8

Global IBs set for revenue boost from trading................................................................... 11

US banks: net interest revenues should be weak ................................................................ 16

Asset management: Strong flows in the US; markets up sharply in Europe ......................... 18

Global IBs: Structural issues still at play .............................................................................. 19

Leverage ratios: Key differentiator among UBS, CSG and DBK ........................................... 19

US Banks: 2015 CCAR cloud clears but increased G-SIB surcharges ahead ...................... 20

Litigation monitor ................................................................................................................ 22

Stock performance in Q1 15 European IBs prevail ........................................................... 23

Company section ................................................................................................................ 25

Bank of America Buy ........................................................................................................ 25

Barclays -- Buy ................................................................................................................... 27

Citigroup Hold .................................................................................................................. 29

Credit Suisse Sell ............................................................................................................. 31

Deutsche Bank Sell .......................................................................................................... 33

Goldman Sachs Sell ......................................................................................................... 35

JP Morgan Buy ................................................................................................................ 37

Morgan Stanley Hold ........................................................................................................ 39

UBS Buy .......................................................................................................................... 41

Wells Fargo Sell ................................................................................................................ 43



9 April 2015 4

Key SG bank sub-sector calls

Key SG bank sub-sector calls

2015 OUTLOOK KEY CALLS

BUY SELL

PR

EF

ER

RE

D

Benelux & Germany

- Funding costs and restructuring to drive EPS upgrades ING, CBK -

- Sound credit quality and capital

France - Funding costs and restructuring to drive EPS upgrades

ACA - - Sound credit quality and capital

UK: Domestic

- An increasing focus on capital return

BARC, LLOY

BOI - Further deposit repricing likely, accelerated by eventual rate rises

- Election (May) too tight to call, could bring volatility

US: Universal

- Return to healthy earnings growth, and greater consistency JPM, BAC

WFC

- Revenue growth outlook positive; pick-up in loan growth and higher ST rates

Wealth Mgmt - Higher AUM driven by rising markets and net new money

UBS - - Wealth management benefits from operating leverage and rising rates

NE

UT

RA

L

CEE

- Poland: Low interest rates put pressure on NIM. Russia: Visibility very low. Akbank, Yapi

Kredi Bank Pekao

SA - Turkey: steady recovery. Other CEE: waiting for loan demand to recover.

Italy - ISP safer and cheaper way to play peripheral banks

ISP, UBI

- - UBI best small play in Italy. Huge discount to Spanish domestic

Spain: Domestic

- Domestic conditions improving POP,

Caixabank BKT

- Valuations discount blue sky scenario in some names

UK: Asian

- Revenue expectations starting to improve from a low base, US rate rises would help

HSBC -

- Continued restructuring to offset rising cost of being international

LE

AS

T

PR

EF

ER

RE

D

Investment Banks

- Trading weakness on rising US rates and volatility spikes BARC

CSGN, DBK, GS

- Regulation and litigation a struggle: leverage, MBS/CDO mis-selling

Nordics - Earnings healthy in Norway and corporate Sweden

DNB

Nordea - Risk of volume slowdown and limited cost extraction opportunities

Spain: Large - Diversified earnings stream

- BBVA - Potential earnings downgrade due to EM exposure

Source: SG Cross Asset Research/Equity



9 April 2015 5

Q1 15 earnings calendar

Tuesday 14 April Wednesday 15 April Thursday 16 April Monday 20 April

JPM BAC Citi GS MS

Call: 8:30 am (EST) Call: 8.30 am (EST) Call: 11.00 am (EST) Call: 9:30am EST Call: 8:30am EST

(866) 541-2724 (US/Can) 877-200-4456 (US) (866) 516-9582 (US/Can) 888-281-7154 (US) 877-895-9527 (US)

(866) 786-8836 (US/Can) 785.424.1732 (Intl) (973) 409-9210 (Int) 706-679-5627 (Intl) 706-679-2291 (Intl)

(706) 634-7246 (Intl) Conference ID: 79795 Conference ID: 90108772

Passcode: 19351679

Tuesday 21 April Wednesday 29 April

Tuesday 5 May

WFC CS BARC DBK UBS

Call: 10 am EST

866-872-5161 (US/Can)

706-643-1962 (Intl))

Source: Company site, SG Cross Asset Research/Equity

Earnings estimates fine tuned; target price and

rating remain unchanged

Q1 15

FY15

FY16

Target price

Rating

New Old New Old New Old New Old Old New

JPM $ 1.40 1.35 5.72 5.74 6.48 6.50 69.00 69.00 Buy Buy

BAC $ 0.30 0.31

1.42 1.44

1.67 1.68

19.00 19.00

Buy Buy

BARC (GBP)

29.85 29.85

36.31 36.31

320.00 320.00

Buy Buy

Citi $ 1.38 1.35 5.18 5.23 5.52 5.55 55.00 55.00 Hold Hold

Wells $ 1.00 0.99

4.12 4.12

4.53 4.53

51.00 51.00

Sell Sell

GS $ 4.10 4.47 16.50 16.10 17.57 16.90 149.00 149.00 Sell Sell

MS $ 0.77 0.78 2.77 2.78 3.17 2.95 37.00 37.00 Hold Hold

CSG (CHF) 0.67 0.66

2.51 2.44

2.49 2.43

15.50 15.50

Sell Sell

DBK (EUR) 1.11 1.14

3.22 3.28

3.51 3.63

23.00 23.00

Sell Sell

UBS (CHF) 0.41 0.40

1.86 1.82

2.07 2.00

23.00 23.00

Buy Buy




9 April 2015 6

SG estimates versus consensus (Q1 15)

SG estimates versus consensus (Q1 15)

BAC JPM Citi WFC GS MS UBS CS DB

SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons. SG est. Cons.

Per share items $ $ $ $ $ $ $ $ $ $ $ $ CHF CHF CHF CHF EUR EUR

EPS 0.30 0.30 1.40 1.39 1.38 1.39 1.00 0.98 4.10 4.09 0.77 0.77 0.41 0.35 0.67 0.70 1.11 0.98

Dividends per share 0.05 0.05 0.40 0.41 0.01 0.02 0.35 0.35 0.60 0.61 0.10 0.11 0.13 - 0.00 - 0.00 -

Book value per share 22.1 21.6 58.4 58.2 67.6 67.3 32.2 32.8 165.3 165.7 35.2 33.9 13.4 - 26.8 - 50.1 -

Tangible BVPS 15.1 14.7 45.3 45.2 58.3 58.1 27.2 27.2 156.0 155.8 30.4 29.1 11.6 21.2 39.3

P&L statement ($m)

Net interest income 9,252 9,902 10,974 11,145 11,870 11,914 11,000 11,215 925 611 1,749 1,990 3,757

Non-interest income 12,045 11,442 14,039 13,053 7,965 7,688 10,129 10,009 8,422 8,397 5,594 3,974 4,866

Revenue 21,297 21,362 25,013 24,379 19,835 19,903 21,129 21,238 9,347 9,083 9,008 9,304 7,343 7,734 5,963 6,535 8,623 8,797

Loan loss provision 782 701 1,036 931 2,220 1,929 622 585 83 28 396

Non-interest expense 15,295 15,266 14,876 14,963 11,435 11,568 12,136 12,523 6,394 6,655 6,253 4,534 6,660

Pre-tax profit 5,220 5,383 9,101 8,176 6,180 6,396 8,371 8,043 2,953 2,905 2,353 2,409 1,090 882 1,402 1,379 1,567 1,386

Net income 3,416 3,487 5,244 5,371 4,316 4,268 5,609 5,163 1,884 1,857 1,523 1,551 1,560 661 1,090 1,229 1,571 1,338

Ratios

NIM % 2.08 2.24 2.08 2.13 2.83 2.94 2.96 3.02 0.46 NA 0.00 NA 1.12 1.51 3.00

ROTE % 8.89 8.06 12.69 12.27 9.92 9.56 15.55 14.37 10.82 10.51 10.40 10.56 14.88 12.61 11.68

ROA % 0.64 0.69 0.90 0.87 0.93 0.94 1.32 1.26 0.88 0.87 0.73 0.78 0.28 - 0.44 - 0.25 -

Efficiency ratio % 71.1 70.6 59.5 60.8 57.7 57.6 57.4 58.9 68.4 NA 73.9 NA 85.2 76.0 77.2

Source: SG Cross Asset Research/Equity, SNL Factset and Bloomberg estimates for consensus

SG estimates versus consensus (2015)

BAC JPM Citi WFC GS MS UBS CS DB BARC

SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons.


EPS 1.42 1.40 5.72 5.77 5.18 5.34 4.12 4.16 16.50 17.28 2.77 2.89 1.86 1.22 2.51 2.20 3.22 3.18 29.85 25.00

DPS 0.20 0.24 1.72 1.71 0.16 0.24 1.55 1.47 2.50 2.46 0.55 0.55 0.50 0.77 0.35 0.89 0.75 1.93 10.00 8.60

BVPS 23.3 22.6 61.1 61.3 71.3 72.2 33.0 34.4 176.0 174.9 36.3 36.5 13.9 13.4 26.4 50.1 346.2 343.4

TBVPS 16.3 15.6 47.8 48.1 62.0 62.7 28.0 28.8 167.1 164.2 31.7 31.7 12.0 20.9 39.3 300.0

P&L statement

NII 39,550 40,853 46,094 44,223 49,416 48,675 45,034 46,269 3,850 2,559 6,758 7,692 14,865 12,736

Non-interest inc. 45,717 45,377 55,161 53,808 28,922 29,291 41,631 41,316 29,888 32,853 22,018 15,363 17,282 13,627

Revenue 85,267 86,661 101,255 98,739 78,338 78,044 86,665 87,597 33,738 34,384 35,412 36,342 28,776 28,726 23,055 24,645 32,147 32,717 26,362 25,850

Impairment 3,333 3,397 4,409 4,178 9,041 8,190 2,752 2,686 272 106 1,525 2,088

Non-interest exp. 56,782 58,305 59,683 59,463 46,080 45,543 49,827 50,451 22,213 26,847 24,954 20,892 27,980 17,637

Pre-tax profit 25,152 24,597 37,164 34,024 23,217 24,722 34,086 34,227 11,526 12,250 8,565 9,235 3,822 4,573 2,057 4,727 2,642 4,642 6,696 6,512

Net income 15,754 15,950 21,341 21,928 16,166 16,268 22,846 21,927 7,268 7,868 5,420 5,758 7,078 4,587 4,321 4,434 4,447 4,693 4,555 4,047

Ratios

NIM % 2.19 2.24 2.13 2.11 2.92 2.90 3.00 3.01 0.48 NA 0.00 NA 1.10 1.55 2.97 2.97

ROTE % 9.96 8.98 12.61 12.00 9.11 8.51 15.73 14.43 10.22 10.53 9.13 9.12 16.3 12.58 8.27 10.45

ROA % 0.73 0.78 0.90 0.87 0.87 0.88 1.25 1.30 0.84 0.91 0.62 0.73 0.37 0.47 0.11 0.00 0.11 0.39 0.33

Efficiency ratio % 65.9 66.9 58.9 60.6 58.8 58.7 57.5 57.5 65.8 NA 75.8 NA 86.7 90.6 87.0 82.0 66.9

Source: SG Cross Asset Research/Equity, SNL Factset and Bloomberg estimates for consensus.



9 April 2015 7

SG estimates versus consensus (2016)

BAC JPM Citi WFC GS MS UBS CS DB BARC

SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons. SGe Cons.


EPS 1.67 1.64 6.48 6.45 5.52 5.86 4.53 4.54 17.57 18.45 3.17 3.27 2.07 1.56 2.49 2.67 3.51 3.83 36.31 29.60

DPS 0.26 0.33 1.85 1.85 0.30 0.72 1.70 1.57 2.70 2.73 0.70 0.70 1.80 1.15 0.50 1.31 0.80 1.11 13.00 11.30

BVPS 25.0 24.1 65.3 65.5 76.7 77.8 34.3 36.8 188.7 189.5 38.1 39.2 13.9 13.9 28.6 52.3 364.8 353.9

TBVPS 17.9 17.0 51.9 52.1 67.1 68.6 29.2 31.2 180.5 178.5 33.6 34.4 12.0 23.0 41.5 322.0

P&L statement

NII 43,099 43,360 50,249 47,186 52,186 51,298 48,381 50,034 4,548 2,757 6,611 7,960 14,843 13,699

Non-interest inc. 48,389 47,874 58,693 56,514 30,259 29,638 44,103 43,244 29,932 34,440 24,417 15,897 17,400 13,751

Revenue 91,488 91,390 108,942 104,411 82,445 81,170 92,484 93,346 34,480 35,969 37,196 39,177 31,028 30,169 23,857 25,382 32,243 33,338 27,450 26,522

Impairment 4,461 4,774 5,196 5,293 10,158 9,523 3,859 4,094 28 101 1,468 2,197

Non-interest exp. 58,006 58,043 62,222 60,484 46,645 45,789 52,079 52,157 22,668 27,669 23,704 17,749 24,570 16,340

Pre-tax profit 29,021 28,466 41,525 37,594 25,642 26,025 36,547 36,789 11,812 12,920 9,527 10,400 7,324 6,697 6,007 6,482 6,205 7,499 8,972 8,117

Net income 18,262 18,191 23,837 24,099 16,715 17,144 24,520 23,515 7,460 8,308 6,093 6,511 7,887 5,845 4,288 4,933 4,953 5,627 6,003 4,863

Ratios

NIM % 2.28 2.32 2.22 2.20 3.00 2.96 3.16 3.10 0.55 NA 0.00 NA 1.12 1.64 3.00 3.19

ROTE % 10.72 9.60 13.16 12.37 8.90 8.54 16.49 14.54 10.03 10.33 9.80 9.51 18.1 12.21 8.89 11.96

ROA % 0.81 0.88 0.97 0.94 0.87 0.91 1.28 1.32 0.84 0.94 0.65 0.78 0.74 0.68 0.53 0.00 0.25 0.51 0.41

Efficiency ratio % 62.7 62.9 57.1 57.8 56.6 56.9 56.3 55.7 65.7 NA 74.4 NA 76.4 74.4 76.2 74.0 59.5

Source: SG Cross Asset Research/Equity, SNL Factset and Bloomberg estimates for consensus.



9 April 2015 8

Key recommendations Global Investment Banks and US Universal Banks Buy recommendations

SG View SG View Q1 earnings expectations

BU

Y

Bank of America

A much cleaner turnaround in profitability is

expected, and we forecast RoTE to rise to

to11% in FY16.

In the near term: cost savings, asset

management, primary markets business and a

pick-up in loan growth should support

earnings growth.

Over the medium term: as short-term interest

rates rise, the banks market-leading deposit

franchise should support NII growth.

NII should be under pressure as the ten-year yields were down 23bp qoq. However, the

combination of improving asset inflows, FICC

trading and cost savings should support

earnings growth.

Key positive would be an improvement in the loan growth as the bank has been re-positioning

its balance sheet and also seems to be losing

market share.

Another positive would be any commentary on the outlook for credit costs the current outlook is for costs to rise substantially. FX-related

litigation expense is possible.

Lastly, operating RWAs are set to rise although should be manageable as the bank just last

month received approval for its capital plan.

Analyst: Murali Gopal

Ticker: BAC US

Buy

Target price: $19

JP Morgan

The bank is in our view best placed to benefit

from a robust macroeconomic recovery. Most

asset-sensitive among the largest banks

although larger non-core deposits, which

should run-off.

Could accelerate exit from its large non-core

loan book (c. 19% of total) as asset valuations

continue to improve.

Faced with a steep increase in GSIB buffer

(4.5% vs 2.5%), capital optimisation and

expense savings are key areas of focus.

However, GSIB buffer likely to restrict any

meaningful upside to current payout near-

term.

FICC trading should be solid and up high-single digit rate despite the sale of the 'physical

commodities' business.

Loan growth should also be solid although non-core book continues to be significant.

Expect non-core spending to pick up as the bank begins implementing its business

simplification and business/product exits plans

with an expected cost savings of $4.8bn over

time.


Ticker: BAC US

Buy

Target price: $69

Barclays

Analyst: James Invine

Ticker: BARC LN

Buy

Target price: GBP 320

Strong self-help deleveraging story as Non-

Core shrinks (2014 alone saw leverage

exposure fall from ~480bn to 277bn)

Core businesses generate 12% RoTE thanks

to high return UK, Africa, cards; IB a drag but

FICC now only 12% of group revenues

I-Bank headwinds of litigation and

restructuring should recede, but a double-digit

RoTE looks difficult without further balance

sheet restructuring

Litigation risks remain high for FX fines and

perhaps also US CDO mis-selling (fourth

largest player in 2006/7); we forecast a further

4bn provisions 2015-17e.

We expect Non-Core leverage exposure to print 250bn (Dec 2014:277bn), benefiting from the

Spanish sale in January (14bn).

In the retail/commercial businesses we expect reasonable volume growth, while Africa's

reported numbers should benefit from the first

quarter of ZAR/GBP stability for several years.

We expect FICC revenues to be about flat: positive backdrop but restructuring disruption

began towards the end of Q1 14; we may see

further hints of balance sheet reduction to be

announced H2 15

UBS

Undervalued versus 2015e ROTNAV of 16%

and 2016e of 18%. Significant excess capital

as RWA and leverage exposure reduces, even

with new leverage ratio rules.

Unrecognised DTA of CHF23bn can be utilised

via the P&L, therefore supporting equity and

CET1 growth. Potential for DTA recognition to

increase due to extension of profit recognition

period.

We see payout ratio of 75% in 2015 and at

least 100% for 2016-18.

Litigation risk is high, but alleviating as FX

fines comes through lower than expected.

RMBS fines should be relatively small (we

estimate CHF2bn in 2015). UBS was a small

CDO player in 2006/7.

New leverage ratio rules in 2015 are an

uncertain overhang risk.

Strong equity markets should have benefited AUM and wealth margin.

Expect DTA recognition to continue to boost earnings.

Greater clarity on FX fines likely to result in reduced COE.

Excess capital expected to build despite tougher Swiss leverage ratio requirements.

Analyst: Andrew Lim

Ticker: UBSG VX

Buy

Target price: CHF23.00




9 April 2015 9

Global Investment Banks Sell recommendations


SE

LL

Credit Suisse

Weak CET1 leverage ratio of 2.5%. Likely

increase in minimum requirements under new

Swiss legislation points to need for equity raise.

We estimate c.CHF6.5bn if CET1 leverage ratio

increases to 3.5% (currently 2.4%).

I-Bank is much more exposed to Emerging

Markets versus peers (c. 11% of I-Bank net profit

on our estimates). Credit and Securitised Product

revenues likely under pressure when US interest

rates increase.

Uncertainty from new Swiss leverage rules, but

these may be less onerous than expected.

We expect CSG benefitted lesser than peers from a

pickup in trading revenues given relatively smaller

presence in macro products. Also, flow credit and

securitised products appear to have weakened again

in Q1 15, areas where CSG has greater exposure.

New Swiss leverage rules have been pushed to year-

end. However, the new CEO may bring forward a

dilutive equity raise to improve the weak CET1

leverage ratio, which will impact ROE.

RMBS litigation provisions are significantly under-

estimated by consensus.

Analyst: Andrew Lim

Ticker: CSGN VX

Sell

Target price: CHF15.50

Deutsche Bank

We are more negative than consensus on

earnings forecasts due to weaker revenue growth

and cost management.

A weak leverage ratio (SGe 3.6% at end-2015)

points to another equity raise of c.EUR5bn to

reach 4.0%.

Fines for RMBS/CDO mis-selling might be

significantly more than expected. We factor in

EUR3bn for 2015. Likely fines for OFAC (we factor

in EUR1.5bn) is another overhang risk, although

risk from FX fines looks to be low.

Meaningful exposure to Emerging Markets in I-

bank versus peers

FX and rates volatility should be a positive for

revenues in the short term but weak leverage ratio

will drive further business contraction in the longer

term.

Consensus has under-estimated provisions for US

RMBS issues in our view, exacerbated by the

strengthening in the US/ exchange rate.

Any strategic announcement regarding

divestment/restructuring has already been priced-in

in our view and will likely disappoint high

expectations.

Analyst: Andrew Lim

Ticker: DBK GY

Sell

Target price: EUR23.00

Goldman Sachs

GS is an expensive stock, trading at 1.2x TNAV

for a 2015e ROTNAV of only 10.4%. We see

headwinds for FICC trading revenues

(commodities revenues under regulatory pressure)

and Investment & Lending revenues, (which

should suffer pressure from implementation of the

Volcker rule).

We believe GS' current aggressive capital return

strategy needs to be reined in, which will reduce

EPS accretion.

Significant market RWA inflation risk from the

Trading Book review.

Trading revenues is relatively large proportion of total

revenues, and along with the primary markets

business is likely to contribute to a good quarter.

However, faced with regulatory constraints, the

earnings contribution from investment and lending

business should steadily decline.

We also expect greater clarity on the buyback

potential post-CCAR, which is likely to be

significantly lower (than last year), and we believe

market expectations.

Analyst: Andrew Lim

Ticker: GS US

Sell

Target price: $149

Wells Fargo

With the near-term outlook challenging, we

expect profitability to decline in FY15.

Slowing earnings growth, deterioration in the

quality of earnings, loan growth largely limited to

low-yielding assets, continuing NIM pressure, loss

absorbing capital issuance, and rising loan loss

provision costs are some of the headwinds.

Valuation multiples have continued to expand,

and at current levels we see little potential for

further re-rating of the stock.

Expect EPS growth to turn negative (yoy) for the first

time in several years. With loan growth (commercial)

already being solid, a pick-up in consumer growth

(jumbo mortgages) will be important in the absence

of a pickup in NIM near-term.

NCOs were at historically low levels (35bp) in Q4

we expect it to have bottomed. Loan-loss provisions

should rise should the consumer (cards) loan growth

improve.

Expense ratio has remained stubborn, and any

decline would be positive.

Faced with revenue pressure, we expect investment

income and some reserve releases to support

earnings.


Ticker: WFC US

Sell

Target price: $51




9 April 2015 10

Global Investment Banks Hold recommendations


HO

LD

Citi

2015 capital plan was approved but EM growth

risks and lower US exposure should keep RoTE

subdued.

Ongoing repositioning should result in substantial

expense savings but fall through to the bottom-line

is expected to be only a small proportion.

Unlikely to reach Citicorps efficiency target (mid-

50%) in FY15.

Expect sharp rise in GSIB surcharge (3.5% vs 2%

currently).

Expect a noisy quarter as various consumer non-

core consumer businesses are included under

'Citi Holdings'.

Key positive would be a pick-up in consumer

spending translating in to higher card balances.

Unlike, its peers, we expect FICC trading

revenues to be weak, in part we believe related

to the losses around Swiss franc volatility.

Details on the ongoing divestment plans and cost

savings will be important.

Expect litigation expenses to fall substantially

and closer to a more normalised level.


Ticker: C US

Hold

Target price: $55

Morgan Stanley

Impressive re-orientation of the group towards

wealth management with the purchase of the

Smith Barney JV. Has achieved increase in WM

margins as free deposits have been deployed into

higher yielding assets and as greater penetration of

the WM client base is achieved (particularly with

respect to securities-backed lending).

Attractive capital build as CET1 and leverage ratios

increase. Potential further release if low return FIC

operations are restructured.

mRWA inflation risk from the trading book review

could limit capital return. MS still has significant

RWA tied up in the low return FIC business.

Hold recommendation reflects full valuation for

turnaround efforts.

Asset (and wealth) management likely had a

good quarter with positive flows, and strong

European equity markets.

Continued deployment of deposits should remain

a positive.

Any additional target for FICC RWA reduction

would be a positive but unlikely, in our view.

Analyst: Andrew Lim

Ticker: MS US

Hold

Target price: $37




9 April 2015 11

Global IBs set for revenue boost from trading

Over the past several quarters, FICC trading (and latterly equities trading) has been adversely

impacted by the lack of volatility. This seems to have changed with reasonable levels of

volatility across several asset classes. We expect trading revenues to have been robust, up

mid-to-high single-digit percentage points yoy and macro, within that (rates and currency) to

have been particularly strong.

However, flow credit and securitised products look to have been weaker yoy for the second

quarter in a row. ECM and DCM revenues also look like they will be softer yoy by high

single/low double-digit percentage points. We believe ECM has suffered from a change in

product mix, with weaker high-margin IPO business offsetting the strength seen in the lower-

margin equity issuance business. In DCM, investment grade spreads have tightened even

further, more than offsetting decent volumes.

Overall, business models continue to be re-sized. US banks seemed to be gaining market

share for a while but that seems to be easing. While the US banks are well capitalised, capital

requirements are moving higher (driven by G-SIB and CCAR regulations). Picking up market

share is no longer a priority. Instead, capital optimisation and RoE are more important.

MOVE Index (treasury market volatility) Currency Volatility Index

Source: Bloomberg and SG Cross Asset Research/Equity

Commodity Volatility Index Credit spreads (bp)


25

50

75

100

125

Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15

4

5

6

7

8

9

10

11

12


4

8

12

16

20


0

20

40

60

80

100

120

140

160

Jan-1

4

Apr-

14

Jul-14

Oct-

14

Jan-1

5

Apr-

15

ITRX EUROPE (EUR) ITRX EUR SNR (EUR)

ITRX ASIAXJ (USD)



9 April 2015 12

US Bond markets (average daily trading volume), $bn US: Stock market volume (daily average), millions of shares

Source: SIFMA and SG Cross Asset Research/Equity

VIX Index (S&P 500 equity market volatility) European market volatility (VDAX Index)


Cash equities Xetra Cash equities Euronext Cash equities LSE

Source: Xetra, Euronext, LSE and SG Cross Asset

Research/Equity,

0

100

200

300

400

500

600

700

800

900

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 (Jan-Feb)

Agency

Corporate

ABS

Non-Agency (MBS)

Agency MBS

Treasury

Municipal

0

1,000

2,000

3,000

4,000

5,000

6,000

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 (Jan-Feb)

DirectEdge

BATS**

NASDAQ

AMEX/ARCA*

NYSE

10

12

14

16

18

20

22

24


12

16

20

24

28

32


-20%

0%

20%

40%

60%

0.0

1.0

2.0

3.0

4.0

5.0

6.0 ADV traded (bn) % change (RHS)

-20%

0%

20%

40%

60%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0ADV traded (bn) % change (RHS)

-20%

0%

20%

40%

60%

0.0

1.0

2.0

3.0

4.0

5.0

6.0 ADV traded (bn) % change (RHS)



9 April 2015 13

Xetra Derivatives Euronext Derivatives

Source: Xetra, Euronext, LSE, and SG Cross Asset Research/Equity

Who is best placed as volatility rises?

On the back of favourable volatility across several asset classes, FICC trading revenues

should see a pick-up. Within FICC, we expect macro products (FX and rates) to have

performed strongly, more than offsetting an expected slowdown in flow credit and structured

products. We expect JPM to report a strong quarter, unlike Citi. Also, DBKs large FX trading

platform is a positive. Meanwhile, CSG and BAC have large credit businesses, which are likely

to have been weak.

GS and DBK have the largest FICC trading revenues (as a proportion of total group revenues).

Also, year-on-year growth trends will be impacted by each banks growth in the same quarter

in the previous year. On that basis, the US IBs seem better placed (see charts on next page).

FICC trading revenues as a proportion of total group revenues


-40%

-20%

0%

20%

40%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

ADNoC (m) % change (RHS)

-20%

0%

20%

40%

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Feb-1

3

Ap

r-1

3

Ju

n-1

3

Au

g-1

3

Oc

t-1

3

Dec-1

3

Feb-1

4

Ap

r-1

4

Ju

n-1

4

Au

g-1

4

Oc

t-1

4

Dec-1

4

Feb-1

5

ADNoC (m) % change (RHS)

0%

5%

10%

15%

20%

25%

GS DBK CSG Citi JPM MS KN BAR BAC CASA BNPP UBS



9 April 2015 14

FICC trading revenue in Q4 14 (yoy growth) was weak, particularly for the US IBs


FICC trading revenue in Q4 14 (qoq growth) US IBs are well placed to experience a rebound


-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

GS BAC JPM BAR Citi MS UBS DBK SG BNPP Natixis CASA CSG

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

GS MS CSG BAC Citi JPM SG DBK BAR BNPP UBS CASA Natixis



9 April 2015 15

Primary markets...mixed quarter ahead

Equity underwriting should be weak as IPO volumes have slumped. We also expect debt

underwriting to have been somewhat weak. However, advisory revenues likely held up well.

Global M&A Announced transactions (Q1 15), $bn

M&A advisor ranking (Q1 15), $m


Q1 15 global equity underwriting volume, $bn (follow-on

offerings likely were strong but IPOs down) Global equity underwriter ranking (Q1 15)


Corporate and international bonds underwriting volume ($bn)

Bond underwriter ranking (Q1 15), $m


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

100

200

300

400

500

600

700

800

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

Volume (LHS) Deal Count (RHS) A dviser T o tal D eal Value R ank D eal C o unt

JP M organ 174,063 1 56

Goldman Sachs 162,657 2 85

M organ Stanley 135,712 3 65

Lazard Ltd 126,078 4 45

Bank of America M errill Lynch 112,492 5 51

HSBC 100,588 6 19

Centerview Partners LLC 99,916 7 11

Deutsche Bank 76,161 8 36

Credit Suisse 72,704 9 30

Somerley 70,586 10 17

0

50

100

150

200

250

300

350

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

U.S. Rest of the worldEquit ies

Underwriter A mo unt R ank Issues

Goldman Sachs 20,858 1 76

UBS 16,603 2 61

M organ Stanley 16,080 3 94

JP M organ 15,756 4 98

Bank of America M errill Lynch 14,864 5 81

Deutsche Bank 11,303 6 55

Citi 10,465 7 69

Credit Suisse 10,203 8 58

Barclays 9,324 9 49

RBC Capital M arkets 4,340 10 44

0

500

1,000

1,500

2,000

2,500

3,000

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

Global Corporate bonds International BondsC o rpo rate bo nds UnderwriterA mo unt Internat io nal bo nds UnderwriterA mo unt

JP M organ 83,023 Barclays 84,000

Bank of America M errill Lynch 66,216 JP M organ 83,996

Citi 65,504 Citi 74,957

Deutsche Bank 59,601 Deutsche Bank 72,563

M organ Stanley 57,458 HSBC 71,118

Barclays 57,185 Goldman Sachs 54,685

Goldman Sachs 51,271 Bank of America M errill Lynch 53,679

HSBC 49,157 M organ Stanley 49,826

Credit Suisse 45,326 Credit Suisse 45,741

Wells Fargo 32,908 BNP Paribas 43,988



9 April 2015 16

US banks: net interest revenues should be weak

US loan growth: Home mortgages (overall) show some revival Europe loan growth: ECB survey shows recovery

Source: Federal Reserve, ECB, and SG Cross Asset Research/Equity

US Banks: Loan growth (reported) US Banks: Non-core loans proportion of total


Although loan growth appears decent (see above), the low interest rate environment is likely to

have kept NII subdued. Also, Q1 is seasonally weak given two less days for interest accrual

during the quarter. In the case of BAC, we further expect greater headwind from the

amortisation of bond premium. The ten-year treasury yield ended 23bp lower compared with

the end of Q4, although the decline was slower than it was in Q4 14 when the yield was 35bp

lower.

The outlook for spread revenues should pick up as loan growth remains healthy, although only

gradually as growth is largely been confined to some of the lower yielding categories, i.e. C&I

and CRE. While auto loans have been very positive, consumer loan growth in general has

remained challenging, particularly credit cards. The trend in credit card balances would be a

key indicator to note in Q1.

Also, with treasury yields heading lower during the quarter, opportunity for re-investments

within the securities portfolio was limited.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 (Jan-Feb)

Total loans C&I Home mortgages CRE Credit cards

-80

-60

-40

-20

0

20

40

60

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

Ja

n-1

0

Ja

n-1

1

Ja

n-1

2

Ja

n-1

3

Ja

n-1

4

Ja

n-1

5

%

Demand Supply

3.0%

-1.0%

4.0% 4.0%

2.0%

-4.6%

-0.6%

3.7%2.6%

-5.0%

-3.1%

5.3%

JPM BAC Citi Wells

Q2 14 Q3 14 Q4 14 21.7%

5.4%

13.9%

9.8%

18.3%

4.0%

11.3%

7.0%

JPM BAC Citi WFC

Q4 13 Q4 14



9 April 2015 17

US 10-year Treasury yield has fallen further Fed funds rate (SG economist forecast)...we see limited upside

to FY15 NIM


Mortgage banking revenues Purchase index picked up in January but has given up some of

the gains. Outlook is positive as we move into a seasonally strong quarter.

The refinancing and purchase indexes

remain weak

Mortgage 30-year fixed rate % (national

average)

Mortgage applications weekly change

(%)


1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

Jun-1

3

Jul-13

Aug-1

3

Sep-1

3

Oct-

13

Nov

-13

Dec-1

3

Jan-1

4

Feb-1

4

Mar-

14

Apr-

14

May

-14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-

14

Nov

-14

Dec-1

4

Jan-1

5

Feb-1

5

Mar-

15

% Average rate1Q15: 1.97%4Q14: 2.28%3Q14: 2.50%2Q14: 2.62%1Q14: 2.77%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

e

20

16

e

20

17

e

%

Fed f unds rate

Libor 3m (USD)

SG Eco team av g. est. (Fed rate)

0

50

100

150

200

250

,0

1,000

2,000

3,000

4,000

5,000

6,000

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Refinancing Index SA

Purchase Index SA (rhs)

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

-15

-10

-5

0

5

10

15

20

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5



9 April 2015 18

Asset management: Strong flows in the US;

markets up sharply in Europe

Asset management Inflows have picked up in the US, and were strong in Europe in Q1 15.

Also, equity markets spiked in Europe in Q1 15, which should have helped CS and UBS in

particular.

Mutual fund flows picked up in the US: Outflows were reversed in domestic US equity funds

after three consecutive quarters of outflows. Also, inflows to non-US products were strong,

registering $22bn (as of 18 March). While inflows into fixed income funds were strong,

doubling to $32bn in Q2 14, they turned anaemic in Q2 and Q3 with $3-$4bn outflows.

However, in Q1 15, the inflows picked up to $33bn. As a result, total long-term inflows of

$71bn were the strongest since Q1 14 (as of 18 March). While flows were solid in the US, the

market performance was lacklustre.

US: Asset management (industry growth), long-term mutual

fund flows picked-up

Europe: Flows were strong to start the quarter

Source: ICI, EFAMA and SG Cross Asset Research/Equity

Asset and wealth management revenues as a proportion of total (FY14)


-60

-45

-30

-15

0

15

30

45

60

75

90

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Domestic/US equity Non-US equity Total Bond Total Hy brid

-10

0

10

20

30

40

50

60

70

Jan '14

Feb '14

Mar '14

Apr '14

May '14

Jun '14

Jul '14

Aug '14

Sep '14

Oct '14

Nov '14

Dec '14

Jan '15

Equity Bond Balanced

61%

53%

40%

20%

16% 15% 15%

11%

0%

10%

20%

30%

40%

50%

60%

70%

UBS MS CS BAC GS Wells DB JPM



9 April 2015 19

Global IBs: Structural issues still at play

Leverage ratios: Key differentiator among UBS, CSG and DBK

The CET1 leverage ratio is a significant (but not the only) differentiator between CSG and UBS.

With a much lower starting position at CSG, together with higher litigation risk, we see CSG

having an equity deficit against a likely minimum CET1 leverage ratio of 3.5% of c.CHF7bn.

This projection incorporates a significant 50% reduction in CSGs cash DPS to CHF0.35 for

2015e, equivalent to a yield of only 2%.

For UBS, on the other hand, we see its CET1 leverage ratio already in excess of a 3.5%

minimum requirement at end-2015, enabling it to pay out 75% of its earnings for 2015e. For

2016 and beyond, continued deleveraging and the absence of large litigation fines should

allow it to pay out 100% of its earnings and achieve yields in excess of 12% for 2016e

onwards.

DBKs leverage ratio (FL) is only 3.5% with additional headwinds related to: 1) a prudential

valuation hit to capital of 1.5-2.0bn; 2) likely leverage exposure inflation from further US dollar

appreciation; and 3) significant litigation charges we forecast an equity deficit of 5bn.

UBS: Leverage ratio glide path

Credit Suisse: Leverage ratio glide path

Deutsche: Leverage ratio glide path


UBS: Expected DPS and payout ratio

Credit Suisse: Expected DPS and payout ratio


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY2013 FY2014e FY2015e FY2016e FY2017e FY2018e

CET1 capital (FL) T1 low trigger hy brids

T1 high trigger hy brids Min. CET1 lev erage ratio

Likely new minimum CET1 leverage ratio

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY2013 FY2014e FY2015e FY2016e FY2017e FY2018e

CET1 capital (FL) T1 low trigger hy brids

T1 high trigger hy brids Min. B3 lev erage ratio

Likely new minimum CET1 leverage ratio

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

FY2012 FY2013 FY2014e FY2015e FY2016e

CET1 capital (FL) Low trigger hy brids

High trigger hy brids Min. B3 lev erage ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0%

10%20%

30%40%

50%60%70%80%90%

100%110%

FY

2013

FY

2014e

FY

2015e

FY

2016e

FY

2017e

FY

2018e

DPF (CHF)

DPS (R/H) Pay -out ratio (L/H)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

FY

2013

FY

2014e

FY

2015e

FY

2016e

FY

2017e

FY

2018e

DPS (R/H) Pay -out ratio (L/H)



9 April 2015 20

US Banks: 2015 CCAR cloud clears but increased G-SIB

surcharges ahead

CCAR was positive for Citi and MS. For GS, we believe management has scaled back its

buyback programme significantly. GSs buybacks were $5.5bn in FY14, which we now think

could be below $1bn for 2015.

CCAR results for individual banks


Dividend/share Buybacks $mil Comments

Quarterly

BAC

13 CCAR 0.01 5,000 Approved

14 CCAR 0.05 - Initially approved; buyback disallowed subsequently.

15 CCAR 0.05 4,000 Conditional approval. Scaled back initial ask.

JPM

13 CCAR 0.38 6,000 Conditional approval


15 CCAR 0.44 6,400 Approved. Scaled back initial ask.

Citi


14 CCAR 0.05 6,400 Denied


WFC

13 CCAR 0.3 Inc. vs FY12 of $3.9bn Approved

14 CCAR 0.35 Inc. vs FY13 Approved

15 CCAR 0.375 continue strong repurch. activity Approved

GS

13 CCAR Potential increase (was $0.55/quarter) Amt. not disclosed Conditional approval

14 CCAR details not disclosed Amt. not disclosed Approved. Scaled back initial ask.

15 CCAR 0.65 (0.60 in prior year) Amt. not disclosed Approved. Scaled back initial ask (we believe substantially).

MS

13 CCAR Approved, incl. acq. of balance 35% in JV Approved

14 CCAR 0.10 (from $0.05) 1,000 Approved

15 CCAR 0.15 3,100 Approved. Scaled back initial ask.

Santander Holdings USA Inc.

14 CCAR Objection based on qualitative concerns


HSBC North America Holdings Inc.


15 CCAR Approved

Deutsche Bank Trust Corpn.




9 April 2015 21

G-SIB surcharge inflation ahead (SGe of new and old surcharges below)

Source: Basel Committee on Banking Supervision, US Federal Reserve and SG Cross Asset Research/Equity

Category WFC JPM Citi BAC GS MS

1. Size 43 78.21 63.42 59.06 33.25 28.10

2. Interconnectedness 38 86.91 84.72 53.89 41.60 55.20

3. STWF 25 69.00 69.30 71.23 109.56 146.26

4. Complexity 53 173.13 101.20 97.10 93.31 98.22

5. Cross-jurisdictional activity 10 66.82 77.11 30.48 32.40 40.96

Total Score 168 474 396 312 310 369

US score multiplier 2x 2x 2x 2x 2x 2x

US G-SIB score 336 948 791 624 620 737

G-SIB buffer SGe 2.00% 4.5%-5% 4.0% 3.00% 3.0% 3.5%

G-SIB buffer (current) 1.0% 2.5% 2.0% 1.5% 1.5% 1.5%

Surcharge bands

Score range Surcharge

230 329 1.5%

330 429 2.0%

430 529 2.5%

530 629 3.0%

630 729 3.5%

730 829 4.0%

830 929 4.5%

930 1029 5.0%

1030 1129 5.5%



9 April 2015 22

Litigation monitor

Litigation monitor: Banks exposure to litigation risks

Source: SG Cross Asset Research/Equity. 1. Ranking data from Euromoney FX Surveys 2. Ranking data from https://ats.finra.org/TradingParticipants

RED - Penalties/settlements which could yet be paid in future. Banks not in the table are deemed to have LOW litigation risk.

Civil settlements are not included.

REGULATORY PENALTIES ALREADY INCURRED and COULD YET BE PAID IN FUTURE

BANK LIBOR

(US & UK)

EURIBOR

(and similar)FX trading 1 PPI mis-

selling

Interest rate

hedging

products

US trade

sanctions

US tax

evasion

FHFA US MBS/CDO mis-

selling

Dark pools 2

Other

CASA Yet to settle Yet to settle Small player in FX market - - 650m likely

settlement?

(Bloomberg)

- - - - - Medium

BNPP - - c.9th largest player in FX

market

- - $8.9bn with one

year ban on $

clearing

- - - - - Medium

DBK Yet to settle 725m fine by

EU for

EURIBOR and

yen LIBOR

manipulation

Top 2 player in FX market.

Risk could be low given

benign reaction from FCA

and US regulators. No

fines incurred yet

- - Likely

exposure.

- $1.9bn

settlement in

Dec 2013

Likely exposure. 3rd

largest player in US

MBS & CDO markets

in 2006/7

4th largest

US dark

pool

Gold and silver

trading (main

player). DoJ suit

for tax evasion.

Possible fee

rebate for

German loans

High

CS Yet to settle,

mgmt claims no

material

exposure

Yet to settle,

mgmt claims no

material

exposure

Small player in FX market - - $536m $2.6bn $0.9bn

settlement

Mar 2014

$10bn lawsuit from

NY Attorney General.

4th largest US MBS

player in 2006/7 (14th

in CDOs)

Crossfinder

is largest

US dark

pool

- High

UBS $1.5bn (o/w

$500m for DoJ,

$700m for

CFTC, $259m

for UK, $64m

for FINMA)

2.5bn fine

avoided due to

whistleblower

status


CHF1.8bn litigation

provision in 3Q14, mainly

for FX? $290m for CFTC,

$371m for UK, $139m for

FINMA (total $800m thus

far). DoJ outstanding. Not

under remit of DFS

- - - $780m.

Potential

use of

bearer

bonds

could result

in further

fines.

$0.9bn

settlement

July 2013

Likely exposure. 8th

largest CDO and 12th

largest MBS player in

2007

2nd largest

US dark

pool

French tax

evasion issue.

1.1bn bond

posted. Will

likely take many

years to resolve

High

BARC $451m, o/w

$160m for DoJ,

$200m for

CFTC, $91m for

UK

690m fine

avoided due to

whistleblower

status


0.5bn 3Q14 FX provision,

followed by 0.75bn in

4Q14. No settlement yet.

Taken total

5.22bn

provision, of

which

1059m

remains

1.34bn provision

taken, of which

211m remains

$0.3bn in Aug

2010

- $0.28bn Likely exposure. 4th

largest US CDO

player in 2006/7. 17th

in US MBS

Sued by

NY

attorney-

general. LX

is third

largest

Gold trading

(main player)

High

HSBC Yet to settle Yet to settle c.5th largest player in FX

market. $378m 3Q14 FX

provision. $275m for

CFTC, $336m for UK (total

$611m thus far); HSBC

carries $550m relating to

future settlements

Taken total

2,578m

provisions, of

which 624m

remains

682m provisions

taken, of which

200m remains

$375m Recent

revelations

of very poor

compliance

in Swiss

private

bank; tax

authorities

were

$550m Possible exposure - Gold & silver

trading. Up to

$600m for

savings rates in

Brazil.

$1.9bn for money

laundering

Medium

STAN - - Small player in FX market - - $667m and

$320m top-up

for insufficient

implementation

of compliance

recommendatio

ns

- - - - - Low

LLOY $370m - - Taken total

12,025m

provisions of

which

680m provisions

taken, of which

109m remains

$350m - - - - - Low

RBS $612m (o/w

$150m for DoJ,

$325m for

CFTC, $137m

for UK)

391m c.8th largest player in FX

market. 400m 3Q14 FX

provision to pay for CFTC

($290m) and UK ($344m)

settlements; a further

320m provided in Q4

Taken total

3,750m

provisions, of

which 799m

remains

1.4bn provisions

taken, of which

424m remains

- - Yet to settle;

2bn held as

provision

against

regulatory

investigations

and litigation

(ex FX/LIBOR)

Speculation of c.3bn

fine, mainly for DoJ

(Times) with no

provisions made.

Already paid $150m

to SEC in Nov 2013.

Top 5 player in US

MBS market

- - High

BAC Yet to settle Yet to settle c.7th largest player in FX

market. Took $400m FX

charge in 3Q14. $250m

fine from OCC thus far.

DoJ and DFS outstanding

- - - - $6.3bn total

settlement

March 2014

$16.65bn 5th largest

US dark

pool

- High

CITI Yet to settle 70m Top 4 player in FX market.

$600m 3Q14 FX provision.

$310m for CFTC, $350m

for OCC, $358m for UK

(Total: $1.018bn thus far).

DoJ and DFS outstanding

- - - - $0.3bn

settlement

May 2013

$7bn Small US

dark pool

- High

JPM Yet to settle $200m c.6th largest player in FX

market. c.$500m 3Q14 FX

provision. $310m for

CFTC, $350m for OCC,

$353m for UK (total

$1.013bn thus far). DoJ

and DFS outstanding

- - - - $4bn

settlement

Oct 2013

$9bn 10th

largest US

dark pool

Hiring of

'Princelings'

under

investigation.

High

GS Yet to settle Yet to settle c.10th largest player in FX

market

- - - - $1.2bn Potential exposure 6th largest

US dark

- Medium

MS Yet to settle Yet to settle Small player in FX market - - - - $1.25bn $2.6bn 8th largest

US dark

- Medium

Litigation

risk profile



9 April 2015 23

Stock performance in Q1 15 European IBs prevail

Performance of stock indices in Q1 15

Indices Q1 14 Q2 14 Q3 14 Q4 14 Q1 15

S&P 500 1.3% 4.7% 0.6% 4.4% 0.4%

Nasdaq 0.5% 5.0% 1.9% 5.4% 3.5%

Euro Stoxx 50 1.7% 2.1% -0.1% -2.5% 17.5%

FTSE 100 -2.2% 2.2% -1.8% -0.9% 3.2%

Bovespa -2.1% 5.5% 1.8% -7.6% 2.3%

Nikkei -9.0% 2.3% 6.7% 7.9% 10.1%

Hang Seng -5.0% 4.7% -1.1% 2.9% 5.5%

VIX 1.2% -16.6% 41.0% 17.7% -20.4%

US Treasury 10-year 2.73% 2.53% 2.52% 2.17% 1.94%


US equities/bank stocks impacted by interest rate and growth

outlook; also by the strong dollar

EU IBs: Stellar performance on optimism driven by ECBs QE measures and improving macroeconomic growth outlook


US banks valuationStrong relationship to profitability European banks valuationSomewhat less correlated

Source: Datastream and SG Cross Asset Research/Equity

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

JPM GS MS BAC Citi WFC KBW Bk

Index

S&P 500

2014 1Q15

-30%

-20%

-10%

0%

10%

20%

30%

40%

UBS CSG DBK SX7P Index Euro Stoxx 600 FTSE 100

2014 1Q15

BAC

Citi

JPM

WFC

GSMS

BBT

COF

FITBKEY

PNC

RF

STI

MTBR = 0.8818

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

8.0% 10.0% 12.0% 14.0% 16.0%

Co

ns

en

su

s F

Y1

5

Pri

ce

/ T

an

gib

le b

oo

k

Consensus FY15 ROTE

BAC

Citi

JPM

WFC

GSMS

R = 0.716 R = 0.7989 R = 0.1358 R = 0.9019

0.0

0.5

1.0

1.5

2.0

2.5

2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

Co

nsen

su

s F

Y15 P

rice /

Tan

gib

le b

oo

k

Consensus FY15 ROTE

Eurozone Non-eurozone CEE US



9 April 2015 24

Long-term valuation: Six-bank US index trades at wider than

historical discount to the S&P 500 Index

Long-term valuation: Four-bank Euro IBs index trades at a

wider than historical discount to the Stoxx 50

US and Euro indexes are SG calculated. Six banks index include JPM, BAC, C, GS, MS and WFC.

Four banks EU IBs index include UBS, CSG, DBK, BARC Source: Datastream and SG Cross Asset

Research/Equity

Long-term valuation: Six-bank US index vs Euro IBs index Short-term valuation: Six-bank US index vs Euro IBs index

US and Euro indexes are SG calculated. Six banks index include JPM, BAC, C, GS, MS and WFC.

Four banks EU index include UBS, CSG, DBK, BARC Source: Datastream and SG Cross Asset

Research/Equity

4

6

8

10

12

14

16

18

Apr-

12

Jul-12

Oct-

12

Jan-1

3

Apr-

13

Jul-13

Oct-

13

Jan-1

4

Apr-

14

Jul-14

Oct-

14

Jan-1

5

Apr-

15

S&P500

6-banks index

4

6

8

10

12

14

16

18

Apr-

12

Jul-

12

Oct-

12

Jan

-13

Apr-

13

Jul-

13

Oct-

13

Jan

-14

Apr-

14

Jul-

14

Oct-

14

Jan

-15

Apr-

15

Stoxx Euro 50

Euro IB index

4

6

8

10

12

14

16

18

Apr-

10

Aug-1

0

Dec-1

0

Apr-

11

Aug-1

1

Dec-1

1

Apr-

12

Aug-1

2

Dec-1

2

Apr-

13

Aug-1

3

Dec-1

3

Apr-

14

Aug-1

4

Dec-1

4

Apr-

15

6-banks index

Euro IB index

6

7

8

9

10

11

12

Apr-

13

Jun

-13

Aug-1

3

Oct-

13

Dec

-13

Feb-1

4

Apr-

14

Jun

-14

Aug-1

4

Oct-

14

De

c-1

4

Feb-1

5

Apr-

15

6-banks index

Euro IB index



9 April 2015 25

Company section

We provide valuation methodology, summary earnings forecasts and risks for each of the

banks discussed in this report.

Bank of America Buy

Valuation ($) Forward Multiple Multiple Valuation Probability Value/share

estimate 3-year avg. assigned per share assigned

Tang. BV/share 16.23 0.8x 1.20x 19.5 25% 5

Forward EPS (NTM) 1.42 9.7x 11.0x 15.6 25% 4

DCF valuation 19.2 25% 5

Sum-of-parts 20.2 25% 5

Weighted valuation/TP 19 Source: SG Cross Asset Research/Equity

Valuation methodology

Our fair value for Bank of America of $19.0 is derived using a probability-weighted

methodology that includes a DCF, trading multiples (tangible book and earnings), and sum-of-

the-parts.

Risks to our target price

FICC trading revenues could remain low for longer. The bank could continue to lose loan-

market share. Investigations related to rogue trading in the LIBOR and currency markets could

result in larger fines than expected. Weakness in CCAR process and RWA inflation could be

significant.



9 April 2015 26

Summary financials

Bank of America financials ($m)

FY 2014 Q1 15e Q2 15e Q3 15e Q4 15e FY 2015e FY 2016e

Income statement

Net interest income 39,952 9,252 9,721 10,117 10,460 39,550 43,099

Non-interest income 44,535 12,045 11,538 11,190 10,944 45,717 48,389

Revenue 85,356 21,518 21,491 21,548 21,654 86,211 92,517

Provision for credit losses 2,275 782 811 850 890 3,333 4,461

Operating expense 75,117 15,295 13,993 13,779 13,715 56,782 58,006

Pre-tax income 7,964 5,441 6,687 6,919 7,049 26,096 30,049

Income tax expense 2,022 1,492 2,156 2,231 2,271 8,150 9,511

Net income 5,942 3,948 4,531 4,688 4,778 17,946 20,538

Net income to common 3,957 3,416 3,987 4,134 4,217 15,754 18,262

Specific business lines

FICC trading 9,013 2,850 2,500 2,200 1,900 9,450 9,850

Equities trading 4,148 1,200 1,100 1,000 900 4,200 4,450

Investment banking fees 6,280 1,595 1,505 1,360 1,500 5,960 6,400

Ratios and payout

Net interest margin 2.2% 2.1% 2.2% 2.2% 2.3% 2.2% 2.3%

Efficiency ratio 88.0% 71.1% 65.1% 63.9% 63.3% 65.9% 62.7%

Dividends 1,263 523 521 518 515 2,077 2,647

Buybacks 1,623 250 800 800 800 2,650 3,600

Total payout % 76% 23% 33% 32% 31% 30% 34%

Earnings and profitability

RoTE 2.7% 8.9% 10.2% 10.4% 10.4% 10.0% 10.7%

EPS diluted (ex. settlement cost in Q3) 0.37 0.30 0.36 0.37 0.38 1.42 1.67

Average diluted shares 10,585 11,217 11,161 11,106 11,050 11,134 10,913

DPS 0.12 0.05 0.05 0.05 0.05 0.20 0.26

Tangible BPS 14.78 15.14 15.50 15.87 16.26 16.26 17.87

Balances

Total assets 2,104,534 2,148,569 2,166,615 2,183,809 2,204,443 2,204,443 2,308,394

Total gross loans 881,391 888,633 895,810 902,639 910,867 910,867 941,346

Total deposits 1,118,936 1,128,483 1,137,962 1,146,992 1,157,830 1,157,830 1,197,531

Loan to deposit 81% 79% 79% 79% 79% 79% 79%

Asset quality and credit costs

Gross NPL ratio 1.3% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%

Gross NPA ratio 1.4% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%

Coverage Ratio % 114% 108% 106% 104% 101% 101% 94%

Provision exp. % of net loans 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.5%

Capital ratios

Core Tier 1 ratio 12.3% 12.3% 12.5% 12.6% 12.8% 12.8% 13.4%

Basel 3 Core Tier 1 ratio (fully loaded) 9.6% 9.6% 9.8% 10.0% 10.2% 10.2% 10.8%

Tangible common equity ratio 7.5% 7.5% 7.5% 7.6% 7.7% 7.7% 7.9%

Supplementary leverage ratio 5.9% 6.0% 6.0% 6.0% 6.1% 6.1% 6.2%

Source: Company reports and SG Cross Asset Research/Equity for estimates



9 April 2015 27

Barclays

Valuation

We value the stock at 320p Our SOTP valuation remains 320p. We value each division

separately, estimating sustainable return on tangible equity, cost of equity and growth. We

value the corporate centre at zero given that it breaks even on average.

Main risks to TP Risks include higher conduct charges than expected. Included within our

forecasts for 2015-17 is a further 3.75bn of charges (which we assume are not tax deductible),

although the actual outcome could be materially higher or lower than this number.

Barclays sum-of-the-parts valuation (GBP)

2016e RWAs CET1 capital Sust RoTE CoE Growth P/TB Value Per share

Personal and Corporate Banking 124,876 14,325 18% 10% 1% 1.9 27,058 164

Barclaycard 50,544 6,360 18% 11% 2% 1.8 11,306 69

Africa Banking 42,521 5,177 12% 12% 3% 1.0 3,210 19

Investment Bank 111,095 13,888 8% 12% 0% 0.7 9,258 56

Head Office 5,975 657 0 0

Barclays Non-Core 40,257 5,782 0.5 2,891 18

Surplus capital 1,800 1 1,800 11

Group total 47,988 55,523 337

Discount to one-year forward 303

Present value of dividends 18

Fair value one-year forward 321




9 April 2015 28

Summary financials

Barclays Group financials (m)

2013 2014 2015e 2016e 2017e

Net interest income 11,600 12,080 12,736 13,699 14,641

Non-interest income 16,296 13,648 13,627 13,751 13,757

Total income 27,896 25,728 26,362 27,450 28,398

Operating expenses -18,180 -16,442 -15,117 -14,320 -14,025

Bank levy -504 -462 -570 -570 -570

Impairments -3,071 -2,168 -2,088 -2,197 -2,615

Other net income -24 11 59 59 59

Adjusted profit 5,385 5,502 7,946 10,222 11,046

Restructuring -1,209 -1,165 -700 -200 -200

Stated profit 4,176 4,337 7,246 10,022 10,846

Underlying profit 5,385 5,502 7,946 10,222 11,046

Restructuring -1,209 -1,165 -700 -200 -200

PPI -1,350 -2,520 0 0 0

IRHP -650 160 0 0 0

Litigation 0 0 -1,250 -1,250 -1,250

Other (inc own debt) 692 725 700 200 200

Statutory profit 2,868 2,702 6,696 8,972 9,796

Tax -1,571 -1,411 -2,745 -3,678 -4,016

Minorities -757 -769 -927 -1,050 -1,143

Net profit 540 522 3,023 4,243 4,637

Diluted average shares 14,668 16,625 16,880 16,913 16,946

Underlying EPS 23.6 23.0 29.8 36.3 39.0

Basic EPS 3.7 3.1 17.9 25.1 27.4

DPS 6.5 6.5 10.0 13.0 16.0

TBVPS 283 285 300 322 346

Core tier 1 solvency ratio 9.13% 10.31% 11.38% 12.76% 13.90%

Core tier 1 leverage ratio 2.93% 3.36% 3.94% 4.61% 5.32%

Tier 1 leverage ratio 3.10% 3.74% 4.35% 5.05% 5.79%

Loans 434,237 427,767 428,712 430,950 431,794

Deposits 431,998 427,704 433,254 438,456 443,820

Assets 1,343,628 1,357,906 1,243,309 1,160,547 1,093,878

RWAs 442,471 401,900 387,377 373,741 370,662

Leverage exposure 1,376,628 1,233,000 1,118,403 1,035,641 968,972

Core tier 1 capital 40,387 41,453 44,067 47,697 51,508

Additional tier 1 capital 2,300 4,600 4,600 4,600 4,600

Tangible equity 45,637 47,065 49,588 53,329 57,462

Cost income ratio 67% 66% 60% 54% 51%

Impairments as % loans 0.68% 0.50% 0.49% 0.51% 0.61%

Return on tangible equity 7.9% 8.3% 10.5% 12.0% 12.0%

Source: Company reports and SG Cross Asset Research/Equity



9 April 2015 29

Citigroup Hold

Probability-weighted valuation methodology used to arrive at our target price ($)

Forward Multiple Multiple Valuation Probability Value/share

estimate 3-year avg. assigned per share assigned

Tang. BV/share 61.95 0.71x 0.90x 55.8 25% 14

Forward EPS (NTM) 5.18 8.4x 9.5x 49.2 25% 12

DCF valuation 54.3 25% 14

Sum-of-the-parts 61.5 25% 15

Weighted valuation/TP 55 SG Cross Asset Research/Equity


Our fair value for Citigroup of $55 is derived using a probability-weighted methodology that

includes a DCF, trading multiples (tangible book and earnings), and sum-of-the-parts.


Downside risks: A sharp rise in EM currency volatility, accompanied by a slowdown in

emerging market economic growth. Also, litigation risks (LIBOR, FX markets, etc) remain

elevated. A slowdown in the US economic recovery would limit DTA utilisation and capital

release. Upside risks: A rapid pick-up in consumer spending and its impact on the card

business; rapid EM economic recovery.



9 April 2015 30

Summary financials

Citigroup financials ($m)

FY 2014 Q1 15e Q2 15e Q3 15e Q4 15e FY 2015e FY 2016e

Income statement

Net interest income 47,993 11,870 12,170 12,583 12,793 49,416 52,186

Non-interest income 28,889 7,965 7,284 7,164 6,509 28,922 30,259

Revenue 76,882 19,835 19,453 19,747 19,302 78,338 82,445

Provision for credit losses 7,473 2,220 2,215 2,271 2,334 9,041 10,158

Operating expense 55,051 11,435 11,404 11,704 11,536 46,080 46,645

Pre-tax income 14,358 6,180 5,834 5,772 5,432 23,217 25,642

Income tax expense 6,864 1,819 1,723 1,711 1,618 6,871 8,746

Net income 7,337 4,316 4,066 4,015 3,769 16,166 16,715

Net income to common 7,470 4,316 4,066 4,015 3,769 16,166 16,715

Specific business lines

FICC trading 11,815 3,600 2,936 3,041 2,584 12,161 12,769

Equities trading 2,776 812 758 687 509 2,766 3,014

Investment Banking fees 4,703 1,035 1,080 985 985 4,085 4,380

Ratios and payout

Net interest margin 2.9% 2.8% 2.9% 3.0% 3.0% 2.9% 3.0%

Efficiency ratio 71.6% 57.7% 58.6% 59.3% 59.8% 58.8% 56.6%

Dividends 121 30 150 149 148 477 868

Buybacks 1,200 300 1,560 1,560 1,560 4,980 6,720

Total payout % 18% 8% 42% 43% 45% 34% 45%

Earnings and profitability

RoTE 4.4% 9.9% 9.2% 8.9% 8.3% 9.1% 8.9%

EPS diluted 2.29 1.38 1.29 1.30 1.21 5.18 5.52

Average diluted shares 3,037 3,027 3,005 2,983 2,962 2,995 2,909

DPS 0.04 0.01 0.05 0.05 0.05 0.16 0.30

Tangible BPS 56.85 58.29 59.54 60.78 61.95 61.95 67.14

Balances

Total assets 1,842,530 1,855,129 1,870,953 1,876,352 1,871,062 1,871,062 1,923,307

Total gross loans 644,635 640,019 654,834 666,105 664,227 664,227 702,007

Total deposits 899,332 888,916 897,032 912,473 909,900 909,900 955,112

Loan to deposit 72% 72% 73% 73% 73% 73% 74%

Asset quality and credit costs

Gross NPL ratio 1.1% 1.2% 1.1% 1.1% 1.0% 1.0% 0.8%

Gross NPA ratio 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.3%

Coverage Ratio % 208% 204% 206% 209% 213% 195% 238%

Provision exp. % of net loans 1.2% 1.2% 1.2% 1.2% 1.3% 1.3% 1.4%

Capital ratios

Core Tier 1 ratio 14.0% 14.4% 14.5% 14.8% 15.1% 15.1% 15.8%

Basel 3 Core Tier 1 ratio (fully loaded) 10.5% 10.8% 10.9% 11.1% 11.4% 11.4% 12.0%

Tangible common equity ratio 9.4% 9.7% 9.7% 9.8% 9.9% 9.9% 10.1%

Supplementary leverage ratio 6.0% 6.2% 6.3% 6.4% 6.5% 6.5% 6.8%

Source: Company reports and SG Cross Asset Research/Equity for estimates



9 April 2015 31

Credit Suisse Sell

Valuation (CHF)

CREDIT SUISSE Sum-of-the-parts fair value Net income

FY2016e

Basel 3

RWA

FY2016e

COE (%) Allocated

TNAV

end-2016

RoTNAV

(%)

FY2016e

Assumed

LT growth

rate g (%)

Fair Value

FY2016e

Fair Value

(disc'd at

12.5%)

FY2015e

% of total

FV

Fair

P/TNAV

FY2016e

Fair P/E

FY2016e

Fair Value

per share

FY2015e

Wealth Management Clients 1,325 52,996 11.0% 5,830 22.7% 2.0% 13,430 11,948 47% 2.30 10.1 7.4

Corporate & Institutional Clients 686 28,572 11.0% 3,143 21.8% 2.0% 6,920 6,157 24% 2.20 10.1 3.8

Asset Management 394 10,599 11.0% 1,166 33.8% 2.0% 4,124 3,669 15% 3.54 10.5 2.3

Private Banking & Wealth Management -

Strategic

2,405 92,166 11.0% 10,138 23.7% 2.0% 24,474 21,774 86% 2.41 10.2 13.5

Investment Banking - Strategic 2,222 127,951 14.0% 17,913 12.4% 0.0% 15,871 14,120 56% 0.89 7.1 8.8

Corporate Center - Strategic -294 16,172 13.0% 2,102 -14.0% 0.0% -2,264 -2,014 -8% -1.08 7.7 -1.3

TOTAL - Strategic businesses 4,333 236,289 12.8% 30,154 14.4% 1.1% 38,082 33,880 134% 1.26 8.8 21.0

Private Banking & Wealth Management -

Non-Strategic

-4 3,884 - - -13 -12 0% - 3.0 0.0

Investment Banking - Non-Strategic -188 2,716 - - -563 -501 -2% - 3.0 -0.3

Corporate Center - Non-Strategic -35 0 - - -105 -93 0% - 3.0 -0.1

TOTAL - Non-Strategic businesses -227 6,599 -681 -606 -2% 3.0 -0.4

Total of subsidiary operations 4,106 242,888 12.4% 30,154 13.6% 1.2% 37,401 33,275 132% 1.24 9.1 20.7

Excess capital at end-2015e -8,975 -8,975 -7,985 -32% 1.00 -5.0

TOTAL GROUP 4,106 242,888 28,426 25,290 100% 15.7



We use a sum-of-the-parts fair value (SPFV) approach to determine Credit Suisses target

price of CHF15.5. For each division, we apply a (ROE-g) / (COE-g) valuation methodology.

Capital is allocated on the basis of a realistic COE applied to B3 RWA for the division. Long-

term growth rates are consistent with our expectations of how various revenue lines should

perform in a rising interest-rate environment. Please note that dividends are excluded from our

SPFV calculation (and therefore the 12-month target price). The dividends that we expect over

the next 12 months are included in the calculation of the 12-month total shareholder return.


New Swiss leverage ratio requirements may be less onerous than we expect.

Litigation for RMBS mis-selling may be much lower than we have forecast.



9 April 2015 32

Summary financials

GROUP FINANCIAL DATA (CHFm) Q1 15e FY2013 FY2014e FY2015e FY2016e

Net revenues (reported) 5,967 25,217 25,815 23,072 23,876

Operating costs (reported) -4,529 -21,546 -22,120 -20,871 -17,728

Pre-tax profit (reported) 1,411 3,504 3,509 2,095 6,047

Taxes -411 -1,276 -1,452 -1,186 -1,626

Net profit (reported) 970 2,326 2,105 881 4,288

Per share data (CHF)

EPS stated (diluted) 0.59 1.31 1.27 0.40 2.49

EPS adjusted 0.67 2.89 2.58 2.51 2.49

DPS 0.00 0.70 0.70 0.35 0.50

TNAVPS 21.20 21.34 22.07 20.87 23.03

BVPS 26.76 26.50 27.63 26.44 28.62

Important financial ratios

ROE 8.9% 6.0% 4.9% 2.0% 9.7%

ROTNAV (reported) 11.2% 7.6% 6.1% 2.6% 12.2%

Cost/income (reported) -76% -84% -84% -91% -74%

Tax rate -29% -31% -37% -58% -27%

Payout ratio 0% 48% 53% 64% 19%

B3 CET1 ratio (fully-loaded) 10.2% 10.0% 10.2% 11.0% 12.5%

B3 leverage ratio (fully-loaded) 3.9% 3.7% 3.9% 4.7% 5.2%

Wealth management (CHFm)



Pre-tax profit (reported) 451 2,050 2,260 1,820 1,952

Corporate & Institutional Clients (CHFm)

Net revenues (reported) 494 1,996 1,973 2,006 2,088

Operating costs (reported) -244 -1,027 -1,004 -1,011 -1,042

Pre-tax profit (reported) 242 965 917 960 1,010

Asset management (CHFm)

Net revenues (reported) 425 1,994 1,849 1,789 2,021

Operating costs (reported) -300 -1,382 -1,300 -1,284 -1,440

Pre-tax profit (reported) 125 612 549 505 581

Investment banking (CHFm)

Debt underwriting 421 1,902 1,777 1,599 1,567

Equity underwriting 179 765 870 752 752

Total underwriting 601 2,667 2,647 2,352 2,320

Advisory and other fees 171 658 749 712 747

Total underwriting and advisory 772 3,325 3,396 3,063 3,067

Fixed income trading 1,396 5,232 5,457 4,802 4,802

Equity trading 1,085 4,847 4,625 4,163 4,246

Total trading 2,481 10,079 10,082 8,965 9,048

Other operating income (expenses) -95 -308 -391 -380 -380



Pre-tax profit (reported) 975 3,894 3,744 3,249 3,272

Underlying Cost / income rati

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