The economic indicators in the United States have been more upbeat at the start of 2013. Business activity in most sectors has increased compared to the fourth quarter of 2012, with the labor market leading the way. The unemployment rate has fallen. In addition, the impact of the fiscal consolidation measures on demand seems to have been less than expected (partly as a result of the agreement that put an end to the “fiscal cliff”, and partly due to a lack of consensus on preventing the automatic implementation of public spending cuts). The financial markets have been unaffected by any contagion from the situation in Europe. However, the U.S. economy is still far from achieving a stable and sustainable pace of recovery without the need for the stimulus provided by the expansive policy of the Federal Reserve.
Against this background, the U.S. dollar has gained 4.3% over the year and 3.0% over the quarter. However, it has depreciated slightly in terms of average exchange rates. The currency’s year-on-year impact on the Group’s financial statements is positive on the balance sheet and on business activity, but slightly negative on the income statement. To assist in the understanding of the business figures, the percentage rates given below refer to constant exchange rates, unless otherwise indicated.
With respect to the country’s financial sector, the health of the banking system continues to improve. The number of banks experiencing problems has dropped. The asset quality of consumer and corporate lending has returned to pre-recession levels, while mortgage defaults remain at rates above 10%. Overall, the NPA ratio at the end of 2012 stood at 4.8%, the lowest figure in the last four years. Despite the low interest rates, bank earnings have improved due to higher non-financial income, lower operating expenses and lower provisions.
Most banks consider future growth will be in increased lending, above all lending to corporates and auto loans, and to a lesser extent in the commercial real estate portfolio and credit cards. The trend in mortgage loans, however, appears to be more difficult to predict.
The results of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) process were announced in the first quarter. The CCAR is an annual exercise aimed at making sure financial institutions have strong capital and planning processes that account for risk and capital adequacy under stress scenarios. Since most banks have received no objections to the plans submitted, analysts are projecting a profitability of over USD 45,000m in dividends and share buy-backs over the next year.