NEW YORK & LONDON--()--The outlook for Fitch Ratings' global trading and universal bank (GTUB) portfolio is stable for 2013, supported by the institutions' underlying credit fundamentals, as discussed in a report published today.
Positive rating drivers for the banks include improved liquidity, funding, capitalization and streamlined businesses. Each of these factors is partially the result of new regulations, and Fitch expects the banks to further streamline operations in 2013. Offsetting the positive drivers are substantial pressures on earnings, ongoing regulatory uncertainties and heightened operational risk.
Fitch expects earnings pressure to remain well into 2013 and likely beyond. Market activity should remain constrained by the macro-economic environment, while markets await greater clarity on the U.S. fiscal cliff situation and the direction of European and global economies.
Most of the GTUBs have built robust balance sheets. However, the potential consequences of a U.S. fiscal cliff or further material disruption in Europe could cause a global slowdown that would negatively affect market activity, resulting in weaker or more volatile revenues. Asset quality could also be impacted if there is a global recession. However, neither situation is currently within Fitch's expectations.
GTUBs will likely remain focused on maintaining adequate liquidity buffers that and reduced short-term wholesale funding reliance. Fitch expects that unencumbered liquidity will remain strong and in cash and highly liquid government securities. Fitch also expects ongoing capital and leverage strengthening.
Fitch established the GTUB peer group in October 2011 as part of a broad assessment of the largest global financial institutions. On Oct. 12, 2012, Fitch affirmed its ratings on 12 of the 13 institutions.
The 13 banks in Fitch's GTUB portfolio are: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland, Societe Generale and UBS.
The full 'Global Trading and Universal Banks' Outlook report is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2013 Outlook: Global Trading and Universal Banks (Stable Outlook Supported by Strengthened Credit Fundamentals)