U.S. Banking Quarterly Comment: 1Q15 (Low Rate Environment Takes its Toll on Regionals)

...Net Income Dependent on Business Model: Results for the largest 16 U.S. banks included in this report were mixed during the quarter. Earnings for the Global Trading and Universal Banks (GTUB) were stronger, impacted by improvements in capital markets activities and the absence of material legal fees, while most of the large regional banks' earnings fell, on average, from last quarter and a year ago. The industry continues to contend with margin challenges given the low interest rate environment, and elevated regulatory and compliance-related charges. These challenges, combined with higher capital requirements, are contributing to downward pressure on returns on equity, with the median ROE now at roughly 9.4% for the 16 banks discussed in this report, trailing the presumed cost of equity of between 10% and 12% and well below pre-crisis levels of approximately 16% in 2005. Big Six Banks Mostly Higher: Core results for the top six U.S. banks included below were mostly higher on both a linked-quarter...

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