FINANCIAL INSTITUTIONSSECTOR IN-DEPTH 8 JULY 2015TABLE OF CONTENTSThe Greek Problem Pressures Most Bank Credit Spreads Globally 1 US Bank Second-Quarter Expectations Remain Positive2Market-implied ratings tables for global banking regions and companies 3 Monthly Bank Risk Report: key credit metrics: CDS, bonds4Appendix : Moodys Capital Markets Research recent publications on the finance sector18ANALYST 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 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 ReportThe Greek Problem Pressures Most Bank Credit Spreads Globally The Greek Problem Pressures Most Bank Credit Spreads Globally By Allerton (Tony) SmithThe still developing fate for Greece, its financial system, and the euro have weighed on banks credit spreads, despite banks limited direct exposure to Greek sovereign debt and counterparty risks from Greek banks. This is clearly evident in the CDS market, as indicated by the widening average five-year bank mid-spreads in the last month, by 11% in the US and 22% in Europe. The average spread over the 10-year Treasury for the bonds of banks globally rated single-A and Baa widened by 52 bp from 279 bp to 331 bp between June 5 and July 5, a19% change.1 Multiple uncertainties about the timing of a solution (if any) to Greeces woes and the ripple effects have prompted many investors to take more defensive positions and remove risk from trading and cross-border exposure books. Not even the prospects for good financial results from the US banks (which will be announced overthe next two weeks) have been sufficient to quell investor concerns.In Europe the average banking institution CDS spread deteriorated by 37 bp from 169 bp to 206 bp over the month of June. The average CDS-implied ratings gap for European banks deterio...
