Q210-Q预览与当前问题

1、COREU.S. Large-Cap Banks2Q19 10-Q Review & Current EventsEPS outlook: Expectations for 3Q19 relative to 2Q19 include stable to modestly lower net interest income reflecting continued loan growth (though seasonal headwinds), lower NIMs (pressured reinvestment rates, though deposit costs beginning to

2、turn), and one more day; varied fee income trends (mortgage higher, IB fees seasonally lower, trading revenues seeing easing y-o-y comps); controlled expenses (branch closures,tech-related efficiency improvements); relatively benign asset quality metrics (thoughINDUSTRY UPDATEU.S. Large-Cap Banks PO

3、SITIVE UnchangedU.S. Large-Cap Banks Jason M. Goldberg, CFA+1 212 526 8580Equity Research19 August 2019NPA, NCO and reserve/loan ratios all bottoming out); a higher tax rate (up 70bps); and a reduced share count (-2% as CCAR 2019 cycle begins; would mark the largest post crisis quarterly decline). I

4、n 3Q19, WFC (Institutional Trust, PAP) should post a sizable gain, while BAC (FDC JV) and COF (breach), KEY (fraud) witness charges.Rates: Based on their disclosed interest rate sensitivity simulations with some adjustments for methodology differences, SIVB, BAC, CMA, BBT, ZION and STT appear to be

5、the most adversely impacted by a 100bp parallel decrease in U.S. interest rates at 2Q19. KEY, USB, ALLY, MTB, HBAN and WFC stood out at the other end. Based on gap disclosure, ALLY is the only bank that has more liabilities repricing within 1-year than assets (as percent of total assets), while BK,

6、FRC, STT and JPM are also relatively low. CMA, MTB, NTRS, SIVB and FITB stand out on the other end.Beta: The cumulative deposit beta this past tightening cycle was 33%. It was closer to 55% in the prior cycle. During this past cycle, SIVB, ALLY, BK, CFG and COF posted the highest deposit betas, whil

7、e STT, ZION, NTRS, RF and MTB experienced the lowest. In 3Q19, the Fed cut interest rates for the first time in a decade and additional easing is expected. While the banks increased their rate paid on deposits as the Fed hiked, we expect the group to lower it on the way down. Looking at the 2000 and

8、 2007 easing cycles, JPM, NTRS, WFC, BK, CMA, FITB, C and BBT/STI had above average deposit betas in both, while SIVB, CFG, MTB, COF, BAC and KEY were below average in both.Asset quality: We expect our coverage to adopt CECL at the start of 2020. Based on the current backdrop, for the median bank, a

9、doption is expected to increase its loan loss reserve by 25% and cost it 1.5% of tangible book (16bps of CET1). In 2Q19, criticized loans increased the most at NTRS (“watch list”), GS, STI, FITB, FRC, and CMA, while SIVB, MS, USB, WFC, MTB, and ZION posted the largest declines.Legal: After steady de

10、clines through first half of 2018, our composites RPL has been slowly increasing. In 2Q19, WFC (+$800mn), GS (+$600mn), C (+$200mn), BK (+$70mn), and CMA (+$1mn) posted increases, while JPM (-$100mn), MTB (-$50mn), FITB (-$26mn), and ZION (-$5mn) reported declines.Shares: GS, CFG, BAC, ALLY, JPM, an

11、d CMA recorded the largest declines in shares outstanding on their 2Q19 10-Q covers relative to 2Q19 average shares (down at least 1.6%), while shares at MS, KEY and FRC recorded modest increases. HYPERLINK mailto:jason.goldberg jason.goldberg BCI, USInna Blyakher+1 212 526 3904 HYPERLINK mailto:inn

12、a.blyakher inna.blyakher BCI, USMatthew Kesselhaut+1 212 526 0181 HYPERLINK mailto:matthew.kesselhaut matthew.kesselhaut BCI, USEugene Koysman+1 212 526 0971 HYPERLINK mailto:Eugene.Koysman Eugene.Koysman BCI, USBrian Morton, CFA+1 212 526 2163 HYPERLINK mailto:brian.morton brian.morton BCI, USal n

13、rten I-d e tc itr sReBarclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors shoul

14、d consider this report as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 68.CONTENTS HYPERLINK l _bookmark0 Outlook3 HYPERLINK l _bookmark1 EPS Outlook3 HYPERLINK l _bookmark2 Gains & Charges3 HYPERLINK l _book

15、mark3 Acquisitions & Divestitures4 HYPERLINK l _bookmark4 Profitability Targets5 HYPERLINK l _bookmark5 Current Events6 HYPERLINK l _bookmark6 Interest Rates6 HYPERLINK l _bookmark7 Deposit Betas7 HYPERLINK l _bookmark8 Current Expected Credit Loss (CECL) Model9 HYPERLINK l _bookmark9 Foreign Exposu

16、re11 HYPERLINK l _bookmark10 Brexit11 HYPERLINK l _bookmark11 Other Foreign Exposures13 HYPERLINK l _bookmark12 Legal17 HYPERLINK l _bookmark13 Interest Rate Sensitivity18 HYPERLINK l _bookmark14 Balance Sheet21 HYPERLINK l _bookmark15 Loans21 HYPERLINK l _bookmark16 Securities Portfolio23 HYPERLINK

17、 l _bookmark17 Deposits25 HYPERLINK l _bookmark18 Net Interest Margin27 HYPERLINK l _bookmark19 Asset Quality30 HYPERLINK l _bookmark20 Criticized Loans30 HYPERLINK l _bookmark21 Level 3 Assets31 HYPERLINK l _bookmark22 Capital32 HYPERLINK l _bookmark23 Share Repurchase35 HYPERLINK l _bookmark24 Aud

18、itors37 HYPERLINK l _bookmark25 Business Mix38 HYPERLINK l _bookmark26 Company Summaries50OutlookEPS OutlookGenerally speaking, the 2Q19 10-Qs reiterated the guidance provided on this past quarters earnings conference calls. Looking out to 3Q19, relative to 2Q19, the general view seems to be: stable

19、 to modestly lower net interest income reflecting continued loan growth (though seasonal headwinds), lower net interest margins (pressured reinvestment rates, though deposit costs beginning to turn), and one more day; varied fee income trends (mortgage higher, investment banking fees seasonally lowe

20、r, trading revenues seeing easing y-o-y comps); controlled expenses (branch closures, tech-related efficiency improvements); relatively benign asset quality metrics (though NPA, NCO and reserve/loan ratios all bottoming out); a higher tax rate (up 70bps); and a reduced share count (-2% as CCAR 2019

21、cycle begins; would mark the largest post crisis quarterly decline).Gains & ChargesBAC: On July 29, BAC gave termination notice to its JV venture partner (FDC) that at the conclusion of its current term (June 2020), it expects to pursue its own merchant services strategy. Still, BAC and FDC have an

22、agreement to provide uninterrupted delivery of products and services to merchants through at least June 2023. BAC owned 49% of the JV with a carrying value of $2.7bn at 2Q19 ($2.8bn at 1Q19). BAC expects to incur a non- cash, pre-tax impairment charge in 3Q19 of $1.7-$2.1bn ($0.14-$0.17/share), with

23、 a 9- 11bps reduction to CET1.BBT: During 3Q19, BBT expects to sell a residential mortgage loan portfolio totaling approximately $4bn. We expect it to book a potential gain/loss in 3Q19, related to this sale.BK: BK has unsecured funded exposure of $100mn to a CA utility that filed for bankruptcy in

24、1Q19 (PG&E we assume). In July, it entered into agreements to sell this exposure (expected to settle in 3Q19). It is expected to result in an $8mn reduction to its allowance for credit losses and reduce its NPAs.COF: In late July, COF announced that on July 19, it determined there was unauthorized a

25、ccess by an outside individual who obtained certain types of personal information relating to people who had applied for its credit card products and to COF credit card customers. Based on its analysis to date, this event affected 100mn individuals in the U.S. and 6mn in Canada. Importantly, no cred

26、it card account numbers or log-in credentials were compromised and over 99% of Social Security numbers were not compromised. COF expects the incident to generate incremental costs of $100-$150mn ($0.17-$0.25/share) in 2019. Expected costs are largely driven by customer notifications, credit monitori

27、ng, technology costs, and legal support. It expects to accrue the costs for customer notification and credit monitoring in 2019. The expected incremental costs related to the incident will be separately reported as an adjusting item as it relates to its financial results. COF carries insurance to co

28、ver certain costs associated with a cyber-risk event. This insurance is subject to a $10mn deductible and standard exclusions and carries a total coverage limit of$400mn. The timing of recognition of costs may differ from the timing of recognition of any insurance reimbursement.KEY: On July 9, KEY d

29、iscovered fraudulent customer transaction activity. Its potential exposure, is up to $90mn, net of tax ($0.09), though could be lower depending on its ability to recover the funds. KEY believes this incident is an isolated occurrence involving a single business relationship.STI: For 3Q19, STI expect

30、s total merger-related impacts tied to its MOE with BBT, to be $10-$15mn.STT: As STT integrates CRD into its business, it expects to incur $200mn, of acquisition costs, including merger and integration costs, through 2021. As of 2Q19, $54mn has been incurred.WFC: On July 1, WFC closed on its sale of

31、 its Institutional Retirement and Trust business and recognized a pre-tax gain of $1.1bn ($0.19). It expects to close on the sale of $500mn of Pick-a-Pay PCI loans in 3Q19 (we estimate a gain of $0.2bn or $0.03/share).Acquisitions & DivestituresALLY: On July 16, ALLY signed an agreement to acquire H

32、ealth Credit Services, a digital point-of-sale payment provider that offers financing to consumers, for $190mn. The transaction is currently expected to close in 4Q19.BBT/STI: On February 7, BBT entered into an MOE agreement with STI. The merger is expected to close late late in 3Q19 or 4Q19. On Jul

33、y 30, BBT and STI shareholders approved the merger. In addition, BBTs shareholders approved Truist Financial Corporation to be the name of the combined company.COF: On July 26, COF announced that it entered into a new, long-term credit card program agreement with Walmart (WMT). Under the terms of th

34、e agreement, it will become the exclusive issuer of WMTs co-brand and private label credit card program in the U.S. On Jan 22, COF announced that it entered into a definitive agreement to acquire the existing portfolio of WMTs co-brand and private label credit card receivables. At closing, COF expec

35、ts the portfolio will consist of $8bn of receivables. COF expects to launch the new issuance program and close on the acquired portfolio late in 3Q19 or 4Q19. On June 21, COF announced the acquisition of Portland, ME-based BlueTarp Financial, a B2B trade credit financing company. It allows for a pur

36、chase-to-payment process featuring a combination of accounts receivable management tools, cash flow and risk protection, with optional collections and customer support. The transaction is expected to close in 3Q19. In addition, on July 31, COF acquired United Income, an online investment management

37、and financial planning company located in Washington D.C. Recall, COF took a 10% stake in United Income in August 2018.GS: In mid-July, GS closed on its acquisition of United Capital Financial Partners for $750mn in cash. United Capital is a registered investment advisor (RIA) with $25bn of AUM and

38、over 220 financial advisors serving 22,000 clients in 90 offices across the U.S.JPM: On July 24, JPM acquired InstaMed, a U.S. healthcare technology company that specializes in healthcare payments.MS: On May 1, MS completed the purchase of Solium Capital, a global provider of software- as-a-service

39、(SaaS) for equity administration, financial reporting and compliance for $0.9bn. The purchase was included for 2 months in 2Q19 and will be in results for a full quarter in 3Q19.NTRS: In late July, NTRS announced the acquisition of Belvedere Advisors, which owns Emotomy, an open-architecture digital

40、 investment advice platform designed for financial professionals. The acquisition is anticipated to close by the end of the year.PNC: In May, PNC announced the sale of certain components of PNC Capital Advisors LLCs (PCA) investment-management business to Federated for $52mn. The sale includes $9bn

41、in assets from three PNC government and treasury money market funds, $2.7bn in equity mutual fund assets and $700mn in fixed-income mutual fund assets. PNC and FII will also encourage PNCs current select equity, structured equity and international separate account and separately managed account clie

42、nts, with $1.5bn in assets, to move to FII. The transaction is expected to close in 4Q19.RF: On August 1, RF acquired Highland Associates, an institutional investment firm based in Birmingham.Profitability TargetsThe median targets for our large-cap banks points to 16% ROTCE, 54% efficiency ratio, 5

43、1bps NCO ratio, and a 9.6% in CET1 ratio.FIGURE 1Profitability TargetsTime FrameROEROTCEROAEfficiencyNCO RatioCET1 RatioALLY201912-13%+46.6-47.6%9.0%BACLong-term12%1.00%60%10.0-10.5%BBTLong-term12-15%19-22%1.40-1.70%0.40-0.60%9.50-9.75%BKLong-termCLong-term16%Low 50%11.5%CFGMedium-term14-16%54%10.0%

44、CMAMedium-term13-15%1.10-1.30%55%9.5-10%COF202142.0%11.0%FITB202018%+1.55-1.65%53.0%9.0%FRCGSHBANLong-term17%-20%53%-56%0.35-0.55%9-10%JPMMedium-term17%55%11-12%KEYLong-term16-19%54-56%0.40-0.60%9-9.5%MS2018-201910-13%11.5-14.5%73%MTBLong-term55%NTRSLong-term10-15%PNCLong-term8.5%RF202118-20%55%0.40

45、-0.65%9.5%STILong-term14-16%56-58%8-9%STTMedium-term12-15%SIVBLong term15% low ratesmid-50% low rates20% norm ratesmid-40% norm ratesTRUIST202122%51.0%9.75-10.0%USBLong-term14.5-17.5%Low 50%0.95%8.5%WFCThru 201912-15%14-17%55-59%0.60-0.70%10.0%ZIONTruist Financial is the chosen name for the BBT and

46、STI would be merged company. Source: Barclays Research and Company reportsCurrent EventsInterest RatesAs detailed beginning on page 18, based on their disclosed interest rate sensitivity simulations with some adjustments for methodology differences, SIVB, BAC, CMA, BBT, ZION and STT were the most ad

47、versely impacted by a 100bp parallel decrease in U.S. interest rates at 2Q19. KEY, USB, ALLY, MTB, HBAN and WFC stood out at the other end. Still, it is important to note, these ranking are heavily influenced by company assumptions. In addition, some model off of a static curve and other from the fo

48、rward curve. Figure 2 and Figure 3 are based on each banks 2Q19 10-Q disclosure of interest rate sensitivity.FIGURE 2EPS Impact from 100bps Parallel Decrease in Rates0%-2%-4%-6%-8%-10%-12%-14%-16%KEY USB ALLY MTB HBAN WFC BK PNC STIC NTRS COF JPM CFG RF FRC FITB STT ZION BBT CMA BAC SIVBSource: Barc

49、lays Research and Company reportsFIGURE 3Net Interest Margin Impact from 100bps Parallel Decrease in Rates0.00%-0.05%-0.10%-0.15%-0.20%-0.25%-0.30%-0.35%ALLY KEY USBCWFC FRC HBAN BK MTB STI CFG PNC NTRS STT JPM RF COF FITB ZION BBT CMA BAC SIVBSource: Barclays Research and Company reportsDeposit Bet

50、asThis past tightening cycle the rate paid on interest-bearing deposits for the median bank increased 74bps, compared to a 225bp increase in the Fed Funds rate, for a cumulative deposit beta of 33% (Figure 4). This was lower than expected at the start of the cycle, though this cycle lasted shorter t

51、han initially anticipated. By comparison, looking at the 2004 cycle, post the first 225bps of rate increases, the cumulative beta was in the mid-50% area and for the whole cycle it was closer to 60%. During this past cycle, SIVB, ALLY, BK, CFG and COF posted the highest deposit betas, while STT, ZIO

52、N, NTRS, RF and MTB experienced the lowest (Figure 6). Still, results, particularly at STT and NTRS, were hampered by a mix shift from noninterest-bearing deposits to interest-bearing deposits. At 2Q19, ALLY, COF, C, CFG, and SIVB had the highest cost of interest-bearing deposits, while STT, NTRS, M

53、TB, BAC and RF were the lowest.FIGURE 4Cumulative Deposit vs. Fed Funds Tightening Cyclelative BetaFed Funds(dotted line)Cumu80%7%70%6%60%5%50%4%40%30%3%20%2%10%1%0%0%0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Quarter #3Q99-4Q002Q04-2Q073Q15-2Q19FIGURE 5Cumulative Deposit vs. Fed Funds Easing CycleCumulat

54、ive Beta;axisinverted)Fed Funds(dotted line80%0%70%1%60%2%50%3%40%4%30%20%5%10%6%0%7%0 1 2 3 4 5 6 7 8 9 10 11 12 13 14Quarter # 4Q00-2Q042Q07-4Q10Source: Barclays Research, S&P Global Market Intelligence and Company reportsSource: Barclays Research, S&P Global Market Intelligence and Company report

55、sFIGURE 6Deposit Beta, 2Q04-2Q07 vs. 3Q15-2Q19 Tightening Cycles80%70%60%50%40%30%20%10%0%STT ZION NTRS RF MTB STI BAC JPM HBAN PNC BBT FRC CMA WFC FITB KEY USBCCOF CFG BK ALLY SIVB3Q15-2Q192Q04-2Q07Source: Barclays Research, S&P Global Market Intelligence and Company reportsIn 3Q19, the Fed cut int

56、erest rates for the first time in decade and additional easing is expected. While the banks increased their rate paid on deposits as the Fed hiked, we expect the group to lower it on the way down (Figure 5). Looking at the past couple of easing cycles, JPM, NTRS, WFC, BK, CMA, FITB, C and BBT/STI ha

57、d above average deposit betas in both, while SIVB, CFG, MTB, COF, BAC and KEY were below average in both (Figure 7).FIGURE 7Deposit Beta, 2Q07-4Q10 vs. 4Q00-2Q04 Easing Cycles90%80%70%60%50%40%30%20%10%0%SIVB MTB USB CFG RF COF KEY BAC HBAN CBBT FITB PNC STT STI WFC ZION CMA BK NTRS JPM ALLY FRC2Q07

58、-4Q104Q00-2Q04Source: Barclays Research, S&P Global Market Intelligence and Company reportsCurrent Expected Credit Loss (CECL) ModelIn their latest filings, more banks have expanded on their qualitative disclosures on FASB issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments C

59、redit Losses (Topic 326). The ASU requires banks to measure all expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts. Upon adoption, banks will use forward-looking information to better inform their credit loss estimates. The ASU also re

60、quires enhanced disclosures, including qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Of note, banks will have to further disaggregate credit disclosures by their year of origination (vintage). We view the move fr