Barclays’ Top Ten Macro Banking Takeaways


Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) recently held its annual Global Financial Services Conference, giving banks an opportunity to air grievances about the regulatory environment, or to alter guidance for investors ahead of third quarter earnings. For all of us unable to attend, here are their ten most important takeaways from the conference.

Barclays’ Macro banking takeaways

1) Loan Guidance Growth is in line with 2Q13 earnings calls

Comerica Incorporated (NYSE:CMA) has 3Q13 loans down 2 percent this quarter to date, while East West Bancorp, Inc. (NASDAQ:EWBC) and Signature Bank (NASDAQ:SBNY) have raised guidance slightly. A large majority of banks are calling for modest growth for the rest of the year.

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2) NIM commentary was slightly above expectation, though still weak in the short term

Most banks called for modest declines in net interest margins because short-term interest rates are still low, but increasing rates will improve securitization reinvestment rates.

3) Asset quality is benign

There was complete consensus of a benign asset quality environment, and most banks expect loan losses to improve.

4) Mortgage banking revenue will decline in 2H13

There was also strong agreement that mortgage banking revenue will decline, with Wells Fargo & Co (NYSE:WFC) expecting a 25 percent to 30 percent sequential decline next quarter. M&T Bank Corporation (NYSE:MTB) thought that consensus estimates were still not bearish enough.

5) Market-sensitive revenues are somewhat soft

JPMorgan Chase & Co (NYSE:JPM) expects 3Q13 will be flat to down 5 percent over the last year, though it noted that September 2012 was unusually strong. First Horizon National Corporation (NYSE:FHN) says daily revenue in capital markets will be similar to last quarter, but below its target, while The Bank of New York Mellon Corporation (NYSE:BK) predicts market-sensitive revenues to be in-line with previous guidance.

6) Litigation and regulatory compliance is driving expenses

JPMorgan Chase & Co (NYSE:JPM) says litigation costs will pass $1.5 billion this quarter, while M&T Bank Corporation (NYSE:MTB) advised that its expenses have gone up considerably as it invests in risk management and compliance. Northern Trust Corporation (NASDAQ:NTRS) said costs associated with risk management and compliance would double from 1H13 to 2H13.

7) Bias for dividends is high

Most banks want to increase dividends and share repurchase in 2014. Capital One Financial Corp. (NYSE:COF) was particularly bullish, while SunTrust Banks, Inc. (NYSE:STI) was more conservative than most. JPMorgan Chase & Co (NYSE:JPM) mentioned a Basel III Tier 1 common target of 10 percent to 10.5 percent, and Wells Fargo & Co (NYSE:WFC) set a target of 9 percent.

8) Banks favor consolidation in the U.S.

Banks said that capital clarity and a settled regulatory environment made them more interested in buying, though they expect high regulatory scrutiny.

9) Regulatory uncertainty persists

Dodd-Frank Act Mid-Cycle Stress Tests are due over the next few weeks, and many banks are still concerned about the changing regulatory environment, with disclosure taking center stage.

10) More discussion about the impact of regulation and technology on retail branches

KeyCorp (NYSE:KEY) expects to close 7 percent of its branch networks next quarter, and PNC Financial Services Group Inc (NYSE:PNC) wants to move customers to self-service channels. Fifth Third Bancorp (NASDAQ:FITB) is planning a ‘micro’ branch project, while City National Corp (NYSE:CYN) will expand its retail branches

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