Are global banks in trouble? These three charts show which lenders are suffering the most

Graham Lanktree
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Two reports this week suggested banking is close to

Better than expected results for Citi Group rounded off a week during which banks in the US reported slumped results, while the IMF and consultancy KPMG questioned the financial recovery.

“Expectations were for $1.05. We got $1.10,” said Joshua Mahony, Market Analyst at IG, a global leader in online trading of the per share value. “People are largely ignoring that the numbers aren’t particularly great, but that they weren’t worse.”

Earnings at Citi were down 27 per cent from the same quarter in 2015, with revenues falling from $19.7bn to $17.6bn in the same quarter year on year.

Each calculated as a per cent, except for revenue. Source: IMF

Mahony shrugged off concerns from the US Federal Reserve and the Federal Deposit Insurance Corporation about JPMorgan Chase, Bank of America, Wells Fargo, Bank of New York Mellon and State Street Bank’s failure to come up with workable strategies to restructure if they faced bankruptcy.

“People wouldn’t be investing in the firms if they thought there were going to fail,” Mahony said. “It’s not going to be much worse than this. This could be a relative low.”

On Thursday JPMorgan Chase, Bank of America and Wells Fargo each posted depressed first quarter profits.

That announcement arrived as the IMF released its Global Financial Stability Report examining the world’s biggest financial institutions profitability and fundamentals. UK banks, Lloyds and Royal Bank of Scotland (RBS) raised concerns for the IMF.

Each calculated as a per cent, except for revenue. Source: IMF

“If any big US bank were to be weak or outright fail, there could be significant contagion to the UK,” said Mayra Rodriguez Valladares, a derivatives specialist and Managing Principal at consultancy MRV Associates. “The danger is that if a US bank were to fail, UK regulators might want to ring a US' subsidiary in the UK, which could exacerbate the position of the US bank and increase panic in the global banking system.”

Negative interest rates, exposure to commodity companies, which have posted low profits, and insufficient growth in China, are weighing on the financial system, she said.

However “banks in the US are in a better capital condition that banks in the UK and Europe”.

That means “that we could see more layoffs in the banking sector if the global economic situation continues to deteriorate,” she said.

As the US banking sector posted its results RBS announced Friday that it would cut 600 jobs and 32 branches after profits at Britain's biggest banks fell by a combined 40% last year.

Large American banks will continue to post their first quarter results next week with Morgan Stanley reporting Monday and Goldman Sacks Tuesday.