www.jpmorganmarkets.comGlobal Equity Research12 January2016Global Investment Bank TrackerCredit-geared banks to underperform in 4Q, but could trigger further restructuring: top pick DBGlobal IBsKian Abouhossein AC(44-20) 7134-4575kian.abouhossein@jpmorgan.comBloombergJPMA ABOUHOSSEIN <GO>Amit Ranjan(44-20) 7134-4576amit.x.ranjan@jpmorgan.comVivek Gautam, CFA(44-20) 7742 3244vi vek.gautam@jpmorgan.comDelphine Lee(44-20) 7134-3971delphine.x.lee@jpmorgan.comRaul Sinha(44-20) 7742-2190raul.sinha@jpmorgan.comJ.P. Morgan Securities plcSee page 61 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.As generally witnessed in Dec, we saw a slowdown in client flows but the revenue decline was exacerbated by a widening of spreads, especially HY. We expect poor credit revenues in 4Qand hence cut our EPS for credit-geared IBs such as MS & CSG, which could also be exposed to low triple-digit mark-to-market losses on inventory positions. We cut our adj. EPS estimates by an avg. 1% in 2015E-17E.We forecast total 4QIB revenues to be -16% q/q, with FICC -22% q/q, Equities -15% q/q & IBD -9% q/q. We believecash equities was a relatively good performer, followed by Rates & FX. We expect to see divergence in trends between banks in 4Q depending on how well they navigated the credit market volatility in Dec. For ‘16E we expect -2% decline in IB revenues, with both FICC &Equities -2% y/y.We expect Equity decline following a strong performance in Asia Equity derivatives in H115. Our pecking order within Global IBs: DB, CS, BARC, UBS, SG, MS, BNP& GS.We estimate 4Q15E FICC revenues to be -22% q/q (-14% y/y), i.e. in line with normal seasonality due to a strong October, offset by a weak December. Credit trading volumes were flat but weakness was driven by widening spreads in high yield and a difficult leveraged loan market. In rates, volatility was -11% q/q but was significantly higher near central bank actions. FX volatility was -2% q/q & ICAP volumes were -12% q/q until Nov, and Dec was weaker in our view. Overall, we see normal seasonality in FXand Rates in Q4. We forecast FICC revenues to decline -2% in FY16E with weaker credit and securitised products only partly offset by Macro.We estimate 4Q15E Equity revenues to be -15% q/q (-20% y/y), with cash equities performing better than equity derivatives in our view. In cash equities, volumes were flat in US & were down c- 10% in Europe, but markets were up strongly in the quarter. Equity derivatives is likely to be down more from a s trong 3Q as avg. volatility was c- 10% q/q & we expect weaker volumes mainly in Asia from strong 1H of 3Q. We estimate Equity revenues to decline -2% in FY16E due to tough H1 comps driven by Asia.We estimate 4Q15E IBD revenues -9% q/q (-16% y/y),with ECM +26%q/q, DCM -13% q/q and Advisory -16% q/q. 2016.We estimate IBD revenues to decline -2% in FY16E. DBK is our top global IB pick,trading at 5.0x P/E & 0.5x P/NAV for RoNAV 10.0% in ‘18E. DB’s valuation implies that the BV is going to be diluted, which we see as unlikely, with B3CET1 improving to 13.2% by 2018E, even with an additional €5.2bn of litigation reserves.Table 2: Summary Overview, local currency (revenues in millions)PriceEPS 16EEPS 17EEquityRev 4Q 15EFI CC Rev.4Q 15EIB div.Rev 4Q 15EB3CET1*2016EB3CET1*2017ETBV/Share**2016ETBV/Share**2017ERoNAV**2017ERoNAV**2018ECS19.71.842.1699770264112.7%13.8%20.5722.4710.1%10.8%UBS 17.51.501.5776533563713.6%13.3%12.3112.5512.7%13.7%DB20.73.804.056001,31154711.9%12.8%38.4740.0510.3%10.0%GS164.516.2017.851,4131,0081,39611.7%11.9%168.25182.6610.2%10.1%MS28.12.973.251,4774501,13513.0%13.2%31.2832.6410.0%10.6%BNP 47.95.265.56370725-11.1%11.9%55.1559.439.7%9.7%Socgen38.94.484.99600435-11.3%11.7%56.1358.948.7%9.0%Barclays2.025.128.738057945311.8%12.4%2.923.069.8%10.1%Source: J.P. Morgan estimates, Bloomberg.Priced on 11thJanEOD (GS&MS 11thJan intraday 12:30PM US); *B3CET1 Is Basel 3 equity T1 assuming no phase in of deductions. **Ex own debtTable 1: Global IBs: clean average IB revenues progression 4Q15E/ 3Q154Q15E/ 4Q1415E/ 1416E/ 15E17E/ 16EFICC-22%-14%-10%-2%-1%Equity-15%-20%4%-2%2%IBD-9%-16%-8%-2%0%Total-16%-17%-5%-2%0%Source: J.P. Morgan estimates, Company data.Please see our notesEuropean Banks Top picks and Investment themes for 2016European Banks: Harmonizing bank capital ratios to drive stock selectionpublished on 7thSep 2015 2Global Equity Research12 January 2016Kian Abouhossein(44-20) 7134-4575kian.abouhossein@jpmorgan.comEquity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($ mn)CCYPriceCurPrevCurPrevCredit Suisse Grou