FINANCIAL INSTITUTIONSSECTOR IN-DEPTH 6 April 2016TABLE OF CONTENTS Bank Credit Market Begins to Take Energy Exposures in Stride 1Market-implied ratings tables for global banking regions and companies 5 Monthly Bank Risk Report: key CDS credit metrics6Monthly Bank Risk Report: key bond credit metrics 10 Appendix: Moodys Capital Markets Research - recent publications on finance sector18ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Bank Risk ReportBank Credit Market Begins to Take Energy Exposures in Stride Credit spreads globally rallied across all sectors in March, and most banks showed better credit spread levels. Banks provided details on the extent of their energy exposures, and for most large institutions challenges to profitability from the drop in energy prices will be manageable.To be sure, defaults and credit losses will occur in the energy sector and these can escalate if prices stay low for a longer period. The one-year EDF (Expected Default Frequency) measure of the probability of default for the US high yield energy sector is around 29%, which means that within one year about a third of the high yield energy companies are currently likely to default. Most of the large banks we monitor in this publication have, relative to their capital and assets, limited exposure to energy sector borrowers; however, some regional banks in the US and various banks in Canada are more vulnerable.Markets have shown genuine relief at the banks disclosures that reduced uncertainties over the energy sector. The average CDS five-year mid-spread tightened over the last 30 days for each of the six regions we track in this publication, with South America showing the most, with an 11% contraction. The average CDS mid-spread for all regions narrowed by 7%. The re...
