All:
Below is the summary from our latest research note, "Q4 2014 Large Bank Earnings Preview: Growth Amidst Deflation." You can read the full report on the link below (free registration required).
Best,
Chris
https://www.krollbondratings.com/show_report/1851 [8]
• Kroll Bond Rating Agency (KBRA) believes that the largest U.S. banks are likely to see relatively flat revenues and earnings in Q4 2014 and in 2015. As we noted in December(Outlook 2015: Deflation Remains the Dominant Theme), flat retail sales and weak consumer demand for credit -– that is, deflation -- continue to be the dominant trends in the global economy. Sharply lower oil prices, while helpful to consumers, are creating credit problems for energy firms and even whole nations, raising regulatory concerns about risks in the leveraged lending sector (Participation in Leveraged Loans: It’s Not Just About Credit Risk).
Deflation https://www.krollbondratings.com/show_report/1815 [9]
Leverage Loans https://www.krollbondratings.com/show_report/1792 [10]
• As with last quarter, we expect to see continued earnings volatility among the largest names as “extraordinary” charges and financial events reduce operating income below Street estimates, many of which have been revised downward since our last Earnings Preview. Areas such as trading and energy lending could bring negative credit and earnings results in Q4 2014 and 2015, but overall we expect continued improvement in the credit profile and ratings of the U.S. banking industry.
• KBRA believes that the chance for a dramatic break-up of large banks, such as has been reported in the media with respect to JPMorgan Chase (NYSE:JPM), is
relatively small, but that all large banks subject to higher capital requirements by regulators are going to be under pressure to shed low-return assets as well as deposits.
https://www.krollbondratings.com/show_report/1851 [8]