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Fitch: Earnings and Profitability Top of Mind at Global Banking Conference
October 12, 2016 / 11:11 AM / a year ago

Fitch: Earnings and Profitability Top of Mind at Global Banking Conference

(The following statement was released by the rating agency) LONDON/NEW YORK/SINGAPORE, October 12 (Fitch) Earnings and profitability are top issues for global banking investors and market participants based on discussions at Fitch Ratings flagship Global Banking Conference which has just completed its world tour, commencing in London and continuing to the US and Asia throughout September and October. A poll taken in the conference in London suggested that the main risk facing creditors of Western European banks is earnings with a high 47% vote. The lowest risk according to the same poll is Brexit at a mere 4%. In New York, the top risk was also earnings at 36%. Polls in Tokyo and Hong Kong showed State-aid and new bail-in rules as the main risk - according to 39% and 73% respectively of those surveyed. When asked whether stringent bank regulation has lowered banks' cost of capital, 38% of London participants said no as the costs of capital remains the same as pre-crisis. Not so far off, 29% said the cost of capital was lower. 43% of respondents in Tokyo replied that banks' cost of capital was lower than pre-crisis. However, 40% of the Hong Kong audience decided that banks' cost of capital remained the same. In New York, 48% said the cost of capital remains the same and 26% said the cost of capital is lower. In a discussion about how bank regulation has pushed certain activities into non-bank financial companies since the crisis, a majority 59% of the audience in both London and New York voted the net impact of shadow banking's post-crisis as negative indicating the risk hasn't left the overall financial system. In fact, it is now housed in less-transparent and less-regulated entities than previously. Respondents in Tokyo were more pessimistic on the size of potential non-performing loans (NPLs) in China, with 42% believing NPLs to be greater than 20%, while most in the audience in Hong Kong and Singapore saw the size of NPLs at 10% to 20%. Banks and their investors are still in the dark over the impact of IFRS 9 accounting rules, which will change the way banks govern and report the asset side of their balance sheet. In a snap poll before a panel on the subject at the conference in London, some 44% of the audience said they had close to no knowledge/hadn't heard of IFRS 9 before the conference. Half of those polled in Tokyo (50%) and Singapore (57%) had little or no knowledge of IFRS 9. In contrast, 80% of the Hong Kong participants had some knowledge of IFRS 9's expected loss approach. "At the Global Banking Conference running for two decades now, Fitch dissects the issues impacting the banking industry and shares the latest insight from our leading analysts around the world," said David Weinfurter, Global Head of Financial Institutions, Fitch Ratings. Video excerpts and slide presentations from the event can be found here. The Global Banking Conference polls took place at events in five cities: London (170 attendees), New York (110 attendees), Tokyo (64 attendees), Hong Kong (25 attendees) and Singapore (262 attendees). Contact: David Weinfurter Managing Director, Financial Institutions +1-212 908 0336 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Hannah James, New York, Tel: + 1 646 582 4947, Email:; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Further information available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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