Corporate Banking & Securities

For 2015, the investment banking industry is likely to see moderate growth supported by a better macroeconomic outlook and increased volatility. However, challenges will remain including ongoing regulatory pressure, continued pressure on resources and the potential impact of geo-political events.

We expect continued global growth in 2015 although differences in regional growth rates will result in increasing divergence in monetary policy. Core sovereign bond yields should rise moderately over the year, although even lower rates are possible in the near term. Despite a rally in 2014, equity levels are expected to remain high supported by higher earnings, stronger business confidence amid lower economic uncertainty, and relatively low global cash and bond yields.

We will continue to dynamically optimize the business, while executing on our cost, capital and leverage targets. Geographically, we will ensure that resources are appropriately allocated to market opportunities and to maximize profitability and returns.

In 2014, CB&S achieved an adjusted post-tax return on average active equity of 13 %. In 2015, we will face significant headwinds to achieve our financial target of an adjusted post-tax return on average active equity of 13 % to 15 %, partly due to the new divisional allocation approach discussed above. Moreover, regulatory driven expenditures, including a higher contribution to the Single Resolution Fund compared to prior levels of bank levies, will negatively impact post-tax return on average active equity for the division.

Ongoing risks and uncertainties include exposure of global macroeconomic growth to event risks, the potential impact of changes in U.S. monetary policy, ongoing regulatory developments, effects of further balance sheet de-leveraging, litigation- and enforcement-related charges, and progress on OpEx cost being offset by regulatory required spend and platform enhancements.

In Sales & Trading, we expect global fixed income revenues to grow slightly in 2015 versus 2014 levels, supported by increased volatility and client activity driven by increasing monetary policy divergence. Cash equities flow revenues should be supported in the medium term by global economic growth, especially in the U.S.

In Corporate Finance, we expect the 2015 fee pool to be slightly lower than 2014 levels which represented a post-crisis peak. While we expect M&A activity to be slightly higher than 2014, driven in part by large transactions announced in 2014, across markets products we anticipate lower activity driven by a higher interest rate environment in the U.S. dampening debt issuance levels and higher volatility reducing equity issuance levels.

Despite the challenging market conditions seen in recent years, and the continued uncertain outlook, through ongoing dynamic optimization of the portfolio and ongoing focus on resource efficiency, CB&S should be well positioned to face the potential challenges and opportunities the future environment may present.