This document provides an analysis of the global banking industry in July 2013. It summarizes market capitalization, assets managed, and average leverage ratios. It then provides ratings and analyses of the top 10 acquirer banks, performer banks, management change banks, acquisition target banks, and distressed banks. It also lists banks on a watch list that could become distressed. The ratings are based on a new methodology introduced in July 2013 that focuses more on leverage ratios. Many banks' ratings changed under the new methodology.

1. The Banking Industry Chessboard
August 6, 2013
Market Capitalization: $5.073 trillion
Assets managed: $79.66 trillion
Average leverage ratio: 6,4%
In July, we decided to change our rating criteria somewhat, giving importance to the
leverage ratio, which you also now see gaining stature in regulatory circles. The banking
industry has gotten away with giving risk weights to balance sheet items in order to meet
capital requirements. I believe it is imperative that we recognize that this has turned into
folly when the CEO of Credit Agricole in the banks earnings release says that his bank is
confident that regulators will agree with him that the bank’s 2,6% leverage ratio ACTUALLY
is 3,5%, in accordance with the way «regulators allow leverage ratios to be calculated».
Yes, I know this is accounting, and by definition it gets a bit arbitrary. However, we need to
agree on a return to WISYWIG – What You See is What You Get. The painful fact for Credit
Agricole is that it is a distressed bank that is allowed to operate by the authorities, who
have not yet approved mechanisms to effectively deal with the banking sector in crisis.
It was a good month for North American banks, while the global banks lost $700bn in
market capitalization. We repeat that our assessment is of M&A clout at any point in time.
We do not forecast performance, nor do our ratings relate to share performance or credit
ratings. Markets are not necessarily global in M&A, so be careful in your conclusions.
PHIMARK Global Index: 167(new)
Acquirers: 77 (-14)
Performers: 213 (+15)
Management Change: 54 (- 9)
Acquisition Target: 219 (+15)
Distressed: 11 (- 2)
Total coverage: 574 (+ 5)

2. Top 10 Acquirer Banks
All our ratings reflect the new methodology introduced
in July. This caused the most turbulence in the Acquirer
ratings, where 7 out of 10 banks in our July 3 report were
downgraded to Performer rating. We believe that was
entirely the result of changes in methodology.
Notably, US Bancorp, Allied Irish Banks and HDFC Bank
Limited showed resilience under both methodologies
and stayed in the top 10. All the other new names were
Acquirer rated also at the time of our last reporting, and
simply rose in the rankings.
Whereas our methodology is absolute when it comes to
defining a Performer from a non-performer, we allow the
market some lee-way in defining what the cut-off is
between an Acquirer and a Performer. The reduction in
the number of Acquirer rated banks this month is more
reflecting the rating methodology changes and an
implied raising of the bar.
Acquirer
Bank Central Asia
U.S. Bancorp
Allied Irish Banks
Grupo Financiero Inbursa
HDFC Bank Limited
Bank Rakyat Indonesia
Qatar National Bank SAQ
Bank Mandiri
Hang Seng Bank Limited
Grupo Financiero Santander México

3. Top 10 Performer Banks
Dimon’s is back, as the rally resumed. Investors raised
the value of JP Morgan Chase by $12bn in the month,
recognizing that the bank is worth what Dimon and his
colleagues report.
The M&A game is not only about ratings, but you have to
also consider size. The top five banks in the Performer
category are the banks with the highest total M&A clout
in the world.
Lloyds and Agricultural Bank of China were downgraded
to Management Change rating, as they are more
leveraged than the market average. This was of course
due to our methodology change, as results improved.
Performer
WellsFargo & Co
JPMorgan Chase & Co.
Commonwealth Bank ofAustralia
Industrial and Commercial Bank ofChina
HSBC Holdingsplc
ChinaConstruction Bank Corporation
Westpac Banking Corporation
Itau Unibanco Holding SA
Royal Bank ofCanada
Sberbank Rossii

4. Top 10 Management Change Rated Banks
Citigroup enjoyed the Wall Street rebound, helped by a
growing US economy, and was upgraded. The market still
looks at the books as having $35bn of unrecognized
losses or similar issues. Citigroup would only gain from
taking some onetime charges, unless, of course, the
problems are more substantial.
In contrast to Citigroup, Credit Suisse, which we
downgraded to Acquisition Target, has a $10bn problem,
but a book adjustment would cause the leverage ratio to
become uncomfortably low, as it is already below a
global market average. Credit Suisse needs to raise
substantial funds, by whatever means, and perhaps one
day adjust book values.
Japanese banks Mitsubishi UFJ and Mizuho were
downgraded to Acquisition targets, as market valuations
declined substantially and we also applied our new
methodology, which punished these highly leveraged
banks.
Management
Change
Citigroup Inc.
Agricultural Bank ofChina
Bank ofChina
LloydsBanking Group PLC
Goldman SachsGroup, Inc.
NORDEA
Banco Bilbao VizcayaArgentariaSA
Morgan Stanley
Capital One Financial Corp.
BOC Hong Kong (Holdings)Limited

5. Top 10 Acquisition Target Rated Banks
Sumitomo Mitsui Financial Group was downgraded from
Performer rating to Acquisition Target in the course of
the month – suffering a double downgrade. This
illustrates the two of the major issues that the Japanese
banks suffered in our ratings during July. At 4% leverage
ratio, the bank is positioned for a high growth economic
scenario with positive results ahead. In a downturn, it is
the most exposed. Bank valuations came down in Japan
during July and carrying on into August. Sumitomo
investors lost 8% of market capitalization, or $5,6bn.
Acquisition
Target
Bank ofAmericaCorp
Banco Santander, S.A.
Mitsubishi UFJ Financial Group
Sumitomo Mitsui Financial Grp, Inc.
BNP Paribas
Bank ofCommunicationsCo Ltd
Royal Bank ofScotland Group plc
Mizuho Financial Group Inc.
Industrial Bank Co Ltd
BarclaysPLC

6. Top 10 Distressed Rated Banks
• Credit Agricole and Commerzbank made it to
the distressed rating, which in itself should
cause concern, because of their relative size.
The banks have some glaring gaps between
market perception of value and accounting
values, while being leveraged for smooth sailing.
The combination is disabling until these severe
issues are addressed.
• First Community Bank of Southwest Florida,
Fort Myers, Florida, also operating as
Community Bank of Cape Coral, was closed by
the Florida Office of Financial Regulation, which
appointed the Federal Deposit Insurance
Corporation (FDIC) as receiver. To protect the
depositors, the FDIC entered into a purchase
and assumption agreement with C1 Bank, Saint
Petersburg, Florida, to assume all of the
deposits of First Community Bank of Southwest
Florida.
Distressed
Credit Agricole
Commerzbank
Federal National Mortgage Association
Sparebanken Vest
BancaPopolare dell'Etruriae del Lazio
SpareBank 1 Buskerud Vestfold
SpareBank 1 Notteroy Tonsberg
Sparebanken Pluss
Klepp Sparebank
Hol Sparebank

7. Watch-list:
Troubled banks that
could go into distress
Commerzbank went from Watch-list to
distressed in the month of June.
Klepp Sparebank went from Watch-list to
distressed in the month of June.
UBI Banca
Caisse Régionale de Crédit Agricole de Normandie-Seine
Banca Piccolo Credito Valtellinese
Sandnes Sparebank
CRCAM Nord de France
Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire
Aberdeen International
Caisse Regionale de Credit Agricole Mutuel Toulouse 31
Crédit Agricole d'Ille-et-Vilaine
Nes Prestegjelds Sparebank
Village Bank and Trust
Caisse Régionale de Crédit Agricole Mutuel de La Touraine et du Poitou
Banca Carige
Chiba Kogyo Bank Ltd
Caisse Regionale de Credit Agricole Mutuel Alpes Provence
Credit Agricole du Morbihan
Banco Popolare

8. Trond Johannessen
Director
Phimark BV
+39 34 66 97 70 97
trond@blackwolfbv.com