FINANCIAL INSTITUTIONSSECTOR IN-DEPTH 3 JUNE 2015TABLE OF CONTENTSUS financial institutions 1Non-US financial institutions 5Market-implied ratings tables for global banking regions and companies 8 Monthly Bank Risk Report: key credit metrics: CDS, bonds9Appendix : Moodys Capital Markets Research recent publications on the finance sector23ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst 250 Greenwich Street 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 Twitter Moodys 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 orproducts. For further detail, please see the last page.Bank Risk ReportBank Market Signals Reflect Continued Stresses US Financial Institutions: Challenges to Profitability Underlie Credit Spread Movements By Allerton (Tony) SmithOver the last year the market-implied ratings for US banks slightly underperformed the broad market. The average CDS-implied rating for the 12 banking companies which we cover in this report has slipped from A3 to Baa1. The average bond-implied rating for the 39 banking companies which we cover in this publication also worsened by one notch from A3 to Baa1.Investor concerns about bank profitability and the continuing market shocks from sizeable regulatory fines and settlements have likely been the main impediments to the banks credit market signals. Profitability metrics within the US banking system are returning toward pre-crisis levels but only slowly, and net income actually declined in 2014 for the largest US banks. This trend reflects numerous challenges for all of the banks.We do expect profitability to benefit from a slowly rising interest rates, continued loan growth, and the finalization of regulatory fines and settlements. The improving balance sheets of the US banks are likely to support consistency in US banks credit spreads, keeping them relatively stable and range bound for the near future.The average CDS five-year mid-spread for our 12-bank peer ...
