Industry Trends

In the first quarter of 2012 net interest income in the US banking sector was better than anticipated, with levels of mortgage revenue holding up strongly. However, some analysts are concerned about the sustainability of these positive trends due to increased fears about a bigger than expected slowdown of the US economy.

Expenses continue to be an area of focus, as banks will try to mitigate the likely effect of dampened revenue levels through greater cost control. Moreover, expense levels in the previous quarter remained higher than projected, so savings and efficiency should be a distinguishing characteristic for banks.

Credit quality continues to improve, with lower provisions having a positive impact on results in the financial industry.

As regards lending, the C&I and auto segments continue to be bright spots. However, overall loan growth is expected to be modest in the second quarter of 2012.

Another important point is that as the implementation of the proposed Basel III rules nears, several peers are taking capital actions in preparation, such as the conversion of preferred securities.

Finally, the exchange rate of the dollar against the euro has strengthened in the last quarter and the last year, both in terms of the fixing and average rate. This has had a positive impact on the balance sheet, activity and earnings in the area over the quarter and in the last 12 months. Unless indicated otherwise, all comments below on percentage changes refer to constant exchange rates, with the aim of providing a better understanding of the performance of the business in the United States.