SINGAPORE (Dec 6) :
4 Trends That Will Affect Global Banks In 2017....
The global banking sector is finishing the year on a high note, with share prices up 3.6% in USD terms, compared with the 8.9% decline in the first quarter and the further decline of 3.5% in 2QFY16 due to falling asset yields.
“The turnaround in sector performance reflects increased optimism about global growth, expectations of economic expansion together with prospects of higher interest rates, especially following in the US presidential election,” said UBS Global Research in a recent report.
Banks in the US would likely be the best performers with a year to date improved performance of 12%, and emerging-market banks following closely behind at 11.4%. The weakest performances would come from European banks which are forecast to finish 13.2% lower, Japanese banks which are expected to fall by 8% and Australian banks which would fall by 2.8%.
the bank’s sector performance could be affected by 4 trends, according to UBS.
The US 10-year bond yield rose by 0.46 percentage points to 2.32% since the US presidential election, driven by the expectation that President-elect Donald Trump will commit to economic stimulus and bring faster growth. “Rising US Treasury yields tend to be generally positive for global banks' share price performance,” said UBS in its report.
The combined balance sheet size of banks in the US and Europe had fallen by 40% to 50% since the global financial crisis, and UBs noted that deleveraging has been slowing down. “Should balance sheets stabilize, and in light of the potential relation outlook, there could be upside risk given current expectations for credit growth”, said the brokerage.
Driven by efforts to reduce operating expenses and improve earnings, coupled with technological advancements, banks could focus on reducing their branch networks in the new year. According to a survey by UBS, mobile banking is set to overtake internet and in-branch banking as the primary distribution channel, and higher mobile adoption would cut branch footprint by 7.3% and reduce costs by 7.6% over a three year period.
The biggest theme would be the debate between re-regulation and de-regulation. The Basel Committee’s potential tightening of bank regulations contrasts with the US’ political rhetoric calling for deregulation of banking rules.
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