euro banks

www.morganmarkets.com

Europe Equity Research16 July 2011

European BanksThe Stress Test converted into JPM Acid Test: Capital raising inevitable

European Banks

Kian Abouhossein AC

(44-20) 7325-1523

[email protected]

Delphine Lee

(44-20) 7325-3971

[email protected]

Amit Ranjan

(44-20) 7325-4780

[email protected]

Jaime Becerril

(44-20) 7742-6449

[email protected]

Eugenio M Cicconetti

(44-20) 7325-8215

[email protected]

Nana Francois, CFA

(44-20) 7325-6424

[email protected]

Paul Formanko

(44-20) 7325-6028

[email protected]

Rohit Nigam

(44-20) 7325-0803

[email protected]

Axel J Finsterbusch

(44-20) 7325 9021

[email protected]

J.P. Morgan Securities Ltd.

See page 25 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 should be 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.

The EBA stress test result is of limited value to us, as a) the sovereign banking book exposures are not fully stressed, and b) it is based on a relatively low 5% min Basel 2 Core Tier I. However, it offers transparency with excellent new input data, especially in respect to sovereign risk and credit exposure at risk. Hence, using EBA’s input data, we run a JPMe Acid test for 27 banks on Basel 3 Common Equity Tier I incl. haircuts on sovereign banking book exposures. In our acid test, 20 banks would fall below JPM 7% hurdle rate resulting in €80bn of capital deficit, split €25bn for UK banks, €20bn for French banks, €14bn for German banks, €9bn for Italian banks, €4bn for Spanish banks, €4bn for Portuguese banks and €4.5bn for Austrian banks.

Comparability of results across jurisdictions is questionable in our view. The EBA stress test is a disappointment for Spanish banks, with credit losses assumptions lower than 2010 and falling exposures to real estate questioning the test’s validity. On the other hand, we find EBA’s stressed earnings assumptions conservative for French, German and UK banks.

EBA stress test II is yet again an opportunity missed for EU member states encouraging banks to raise equity as Basel 3 ratios remains low at justavg. 6.6% 2012E in our JPM Acid Test, in our view. We remain worried about the secondary effect of the sovereign crisis into funding with two key issues i) short-term $ funding, and ii) one-way CSA with a sovereign as discussed in ‘Sovereign risk concerns- capital and funding at risk’. Funding is the key concern, and without stress liquidity assumptions, the picture remains incomplete, especially in current market conditions.

We continue to prefer banks with solid capital position, limited sovereign haircut risk, and limited short-term funding profile. In a global context, we believe US banks will outperform Europeans at similar valuations but better capitalized and market confidence in BVs. We believe credit banks continue to have higher long-term earnings at risk compared to equity-geared IBs. We continue to prefer UBS as our global top IB pick with IB restructuring potential and limited sovereign risk exposure with B3 CT1 12.1% 2012E. Our additional top picks are defensive with Swedbank and HSBC. Our ‘default’ core Europe pick is BNPP although we see some short term pressure on capital levels and short term funding. ISP is our preferred sovereign pick, considering capital position and funding. We remain cautious on Spain, UK domestic and German Banks.

Table 1: European banks – Summary Valuation (local currency)

Rec Price TP EPS 2011E EPS 2012E NAV*/Sh. 2011E NAV*/Sh. 2012E RoNAV*2012E Basel 3 CT1 12E**

UBS OW 13.7 20 1.74 2.15 10.8 13 18.0% 12.1%BNP OW 45.28 65 6.90 7.50 45.5 50.7 15.6% 8.5%HSBC OW 599 900 0.99 1.22 711 774 16.9% 9.3%Swedbank OW 100.9 128 11.72 12.46 79.6 85.0 14.4% 13.7%ISP OW 1.58 3.1 0.24 0.26 2.4 2.6 10.5% 9.4%

Source: J.P. Morgan estimates. Bloomberg (14th July 2011 COB.) * ex own debt. ** Basel 3 estimates pre acid test assuming no phasing of capital deductions

Bank Stress Test Analysis & Conclusion Conference Call

Sunday, July 17 @ 1:00pm ET / 18:00 UKDIAL-IN: 866-803-2145 (US); +1-210-795-1099 (Outside US); Passcode: 9778548

https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-628008-0.pdf

https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-628008-0.pdf

2


Kian Abouhossein(44-20) [email protected]

JPM Acid test- €80bn capital shortfall

We run our JPM acid test on 27 banks of our universe of coverage and come up with a capital shortfall of €80bn. As highlighted in the previous section our acid test assumes tougher scenario and higher capital requirements than EBA’s stress test. Thereby, only 7 banks manage to stand above the 7% threshold. We run only one scenario which includes sovereign haircuts as well as credit impairments.

Across geographies, capital needs are split as follows:

€24.7bn for 4 UK banks. Lloyds’ capital needs stand at €10.5bn, Barclays at €1.3bn, HSBC at €5.5bn and €7.4bn for RBS.

€19.9bn for 2 French banks with BNP accounting for €12.2bn and SG €7.7bn.

€14bn capital shortfall for 2 German banks. Capital needs for DB stand at €9bn whereas CBK would need an additional €5bn.

€8.6bn for 4 Italian banks, with UCG and BAPO representing the bulk of this figure; €5.9bn and €1.9bn, respectively.

€4.5bn for 2 Austrian banks

€4bn for 2 Portuguese banks. Capital deficit for BCP stands at €3bn while BES’s capital shortfall stands at €1.1bn.

€3.8bn for 5 Spanish banks. The bulk of capital needs come from POP, €2.4bn, Sabadell €923mn and Bankinter €409mn, whereas the rest of the banks show a nil capital shortfall. Moreover, SAN manages to pass our stress test and achieved a small capital surplus.

All our 6 Nordic banks passed our Acid test.

Table 2: Banks below 7% core tier one Basel III

Country Bank Shortfall Country Bank Shortfall Country Bank Shortfall Country Bank Shortfall

France BNP 12,153 Germany DB 8,963 Spain BBVA 57 Austria Erste 2,540France SG 7,683 Germany CBK 5,041 Spain Popular 2,421 Austria RBI 2,004Italy UCG 5,937 UK Barclays 1,348 Spain Bankinter 409Italy ISP 187 UK Lloyds 10,477 Spain Sabadell 923Italy BAPO 1,908 UK HSBC 5,485 Portugal BCP 2,998Italy UBI 592 UK RBS 7,423 Portugal BES 1,160

Source: Company reports and J.P. Morgan estimates.

3



Table 3: JPM Acid Test vs. EBA stress test

EBA JPM CT 1, 2012

CT 1, 2012 adverse

Shortfall vs. 5% core tier 1 (€ bn)

JPM 12E Basel CET1

JPM 12E stress Basel CET1

Shortfall vs. 7% Basel 3 CET1(€ bn)

FranceBNP 9.8% 7.9% - 8.5% 5.3% -12,153SG 8.3% 6.6% - 7.5% 5.3% -7,683ItalyUCG 7.9% 6.6% - 8.0% 5.9% -5,937ISP 8.8% 7.4% - 9.4% 6.9% -187BAPO 6.1% 5.0% - 7.3% 5.1% -1,908UBI 6.9% 6.4% - 7.4% 6.4% -592GermanyDB 8.5% 6.5% - 7.0% 5.2% -8,963CBK 8.9% 6.4% - 8.4% 5.2% -5,041UKBarclays 10.0% 7.3% - 8.1% 6.8% -1,348Lloyds 11.1% 7.7% - 8.1% 4.9% -10,477HSBC 10.7% 8.5% - 9.3% 6.5% -5,485RBS 9.1% 6.3% - 8.7% 5.9% -7,423SpainSantander 9.5% 8.4% - 9.3% 7.1% 838BBVA 10.9% 9.2% - 8.9% 7.0% -57Popular 7.4% 5.2% - 9.1% 4.4% -2,421Bankinter 7.0% 5.3% - 8.1% 5.8% -409Sabadell 6.8% 5.0% - 9.0% 5.4% -923NordicsNordea 10.1% 9.5% - 10.0% 8.0% 2,328SEB 12.1% 10.5% - 13.1% 10.5% 3,282Swedbank 9.8% 9.4% - 13.7% 11.2% 2,823Danske 11.9% 13.0% - 10.6% 9.7% 3,868SHB 9.0% 8.6% - 11.9% 10.9% 3,012DNB 9.4% 9.0% - 11.0% 9.4% 3,219PortugalBCP 5.6% 5.4% - 7.4% 1.8% -2,998BES 6.1% 5.1% - 8.3% 5.4% -1,160CEEMEAErste 9.5% 8.1% - 8.0% 5.2% -2,540Raiffeisen 9.0% 7.8% - 7.0% 5.1% -2,004EFG 7.9% 4.6% 0.06Piraeus 9.1% 5.3% -

Source: J.P. Morgan estimates. EBA. CET1- Commoan equity tier 1. Note: Basel 3 Common Equity Tier I ratios assuming no phasing of capital deductions. Société Générale: our starting Basel 3

Common Equity of 7.5% excludes a) the €1.2bn positive impact from paying 2012e dividends in shares mid-2013, and b) the positive impact from additional mitigation initiatives with the group

targeting 9% Common Equity Tier I end 2013 including at least 50bp of additional mitigation.

Figure 1: Current JPM 12E Basel III CET1

Source: J.P. Morgan estimates. Note: Basel 3 Common Equity Tier I ratios assuming no phasing of capital deductions. Société Générale: our starting Basel 3 Common Equity of 7.5% excludes a)

the €1.2bn positive impact from paying 2012e dividends in shares mid-2013, and b) the positive impact from additional mitigation initiatives with the group targeting 9% Common Equity Tier I end

2013 including at least 50bp of additional mitigation.

7.0% 7.0% 7.3% 7.4% 7.4% 7.5% 8.0% 8.0% 8.1% 8.1% 8.1% 8.3% 8.4% 8.5% 8.7% 8.9% 9.0% 9.1% 9.3% 9.3% 9.4%10.0%10.6%11.0%11.9%

13.1%13.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

4



Figure 2: 12E Basel CET1 ratios post JPM acid test

Source: J.P. Morgan estimates. Note: Basel 3 Common Equity Tier I ratios assuming no phasing of capital deductions. Société Générale: our starting Basel 3 Common Equity of 7.5% excludes a)

the €1.2bn positive impact from paying 2012e dividends in shares mid-2013, and b) the positive impact from additional mitigation initiatives with the group targeting 9% Common Equity Tier I end

2013 including at least 50bp of additional mitigation.

EBA Stress Test: 8 banks fail to reach 5% Core Tier 1 under adverse scenario pre mitigating measures

Only 8 banks failed to reach the 5% core Tier 1 ratio required to pass under the EBA stress test methodology as shown in Table 4 . Of these 5 banks are in Spain, 2 in Greece and 1 in Austria. Total capital required for these 8 banks to reach 5% Core Tier 1 ratio is €2.5bn under the EBA stress test methodology.

Table 4: 8 banks fail to reach 5% Core Tier 1 ratio under adverse scenario, pre mitigating measures

%, €millions

Bank Country Core Tier 1 ratio under

adverse Scenario

Capital required to

reach 5% Core Tier 1

Supervisory recognised capital ratio after

additional taken or planned mitigating

measuresOESTERREICHISCHE VOLKSBANK AG Austria 4.5% 160 9.8%EFG EUROBANK ERGASIAS S.A. Greece 4.9% 58 7.6%AGRICULTURAL BANK OF GREECE S.A. (ATEbank) Greece -0.8% 713 6.0%CATALUNYA CAIXA Spain 4.8% 75 6.3%PASTOR Spain 3.3% 317 5.6%UNNIM Spain 4.5% 85 6.2%GRUPO CAJA3 Spain 4.0% 140 6.6%CAJA DE AHORROS DEL MEDITERRÁNEO Spain 3.0% 947 5.1%Total Capital required 2,495

Source: EBA 2011 Stress test documents

1.8%

4.4% 4.9% 5.1% 5.1% 5.2% 5.2% 5.2% 5.3% 5.3% 5.4% 5.4% 5.8% 5.9% 5.9% 6.4% 6.5% 6.8% 6.9% 7.0% 7.1%8.0%

9.4% 9.7%10.5%10.9%11.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

5



JPM Acid test - Methodology and Assumptions

With a view to analyze the capital position of European banks under the most conservative assumptions, we perform our JPM acid test – wherein we compare our estimates of pre-provision profits and banking book impairment charges with those calculated under the EBA stress test and incorporate the more conservative number into capital calculations, i.e. we take lower of JPM and EBA pre-provision income and higher of JPM and EBA impairment charges1. In addition, we also incorporate for haircuts on peripheral sovereign exposures in the banking book. Given this relatively aggressive methodology, results under JPM acid test are more severe than EBA.

Key areas where our methodology differs from that employed by EBA:

JPM acid test are performed on Basel III common equity capital; in comparison EBA stress tests are based on core tier 1 capital (which differ from Basel III assumptions in terms of treatment of DTAs, AFS reserves, participations in financial institutions etc). Whilst EBA capital calculations incorporate all forms of government support, JPM calculations only include government support which is either in common equity or has a conversion feature into Tier 1 capital.

Capital excess/shortfall within the JPM acid test are calculated based on a 7% Basel III 2012 equity level - which we believe is the minimum required level for banks. EBA methodology in comparison uses a 5% core tier 1 threshold.

JPM acid test is based on our Basel III RWA estimates, which includes the impact of CVAs, higher risk weights for securitizations, mitigation initiatives (as guided by companies) in addition to Basel 2.5 changes. We do not adjust our estimates for the increase in RWA under EBA adverse scenario (difference between 2010 RWA and 2012 RWA under adverse scenario) as i) we are comparing different methodologies and ii) potential use of Basel 2.5 is already accounted in EBA numbers (as per EBA document ‘To capture regulatory changes (i.e CRD III) banks may use a scaled increase vis-a-vis 2010 in the RWA for market risk’).

The banking book for government related exposures has not been stress tested in the sovereign haircut scenario (EBA). The JPM acid test includes the banking book stress test for exposures to Greece, Ireland, Portugal, Spain and Italy. We do not include trading book exposures in our haircut analysis, as it is already marked-to-market through P&L and Core Tier 1 capital; however we have incorporated trading losses provided by EBA under the sovereign shock scenario into our analysis. We have factored a 40% haircut for Greece, 30% for Ireland and Portugal, 10% for Spain and Italy which are roughly in line with those implied by current CDS levels.

Methodology employed within the JPM Acid test

We adjust our current 2012 Basel 3 core capital to incorporate for the difference between our estimates and those provided under EBA adverse scenario - for pre-

1 EBA stress test are based on a static balance sheet assumption, whilst JPM forecasts are based on a dynamic balance sheet assumption

Table 5: Haircut assumptions for sovereign banking book exposures in our analysis

%

CDS implied

haircuts*

Haircuts used in our

analysis

Greece 32% 40%Ireland 22% 30%Portugal 23% 30%Spain 10% 10%Italy 8% 10%

Source: J.P. Morgan estimates.* CDS implied

haircuts assuming 40% recovery rate and 60%

implied premium to expected default rate

6



provision income and impairment charges. Whilst comparing JPM and EBA figures, we incorporate the more conservative numbers, i.e. taking the lowest figure for pre-provision income and highest figure for impairment charges. In addition to these adjustments, we also incorporate for haircuts on peripheral sovereign portfolio.

We illustrate our stress test methodology in the following table

Table 6: JPM stress test methodology- Adjustments to current Basel III core tier 1

Adjustment 1- Pre provision income = JPMe 11-12 cumulative pre-provision profits - Minimum (EBA 11-12 adverse scenario pre-provision profits, JPMe 11-12 cumulative pre-provision profits)

Adjustment 2- Impairment Charges = JPMe 11-12 impairment charges - Maximum (EBA 11-12 adverse scenario 2 year cumulative losses on banking and trading book, JPMe 11-12 impairment charges)

Adjustment 3- Banking book haircut = JPM calculated haircut on sovereign exposure in banking book

Adjustment 4 Tax = tax rate x (Adjustment 2- Adjustment 1- Adjustment 3)

JPM 12E Stress Basel III CET1 capital = JPM 12E Basel III CET1 capital + Adjustment 2 - Adjustment 1 - Adjustment 3 - Tax

JPM 12E Stress Basel III CET1 ratio = JPM 12E Stress Basel III CET1 capital / JPM 12E Basel III RWA

Source: J.P. Morgan.

Caveats to our methodology

JPM acid test includes our current estimates of dividend payouts for 2011-12, which may not be feasible in a stressed scenario.

We use a uniform haircut based on 5yr maturity for the entire sovereign book. Our method would thus penalize banks which have higher proportion of peripheral bonds in short term maturities. Similarly, our method would understate the impact for banks with higher maturity portfolio.

Our acid test does not account for hedging of sovereign portfolio in banking book (via CDS). This is particularly for the case when JPM estimates for pre provision income are lower than EBA figures and impairment charges are higher than EBA (as EBA numbers incorporate hedging impact).

We have not included negative impact on AFS reserves from rise in interest rates, as we believe this would double count the impact for peripheral exposures (for which we are assuming a haircut). This limitation however arises for non peripheral exposures, for which haircuts are not assumed.

Our methodology uses our current estimates of 2012 Basel III RWA. These estimates do not incorporate for RWA increase from default and migration risks which contribute to RWA increase under EBA adverse scenario.

7



Table 7: JPM stress test

€ mn, %

JPM 12E Basel 3 Capital

JPM 12E Basel 3 RWA

JPM 11-12E Pre-prov income

EBA 11-12 Pre prov

income(Adverse)

Adj. for Pre prov

income

JPM 11-12E

Impairments

EBA 11-12 Impairments on bkng

book (Adverse)

Adj. for Impairments

Sovn haircut on Banking

Book

Total Adjustm

ents

JPM 12E Basel 3 capital post stress test

JPM 12E Stress Basel 3

ratio

Excess/(shortfall) vs. 7%

B3 ratio

France BNP 60,530 716,010 36,932 18,408 -18,524 -7,506 -16,234 -8,728 -4,980 -32,232 37,968 5.3% -12,153 SG 34,032 451,875 20,356 11,522 -8,834 -5,530 -9,539 -4,009 -1,162 -14,005 23,948 5.3% -7,683Italy UCG 41,729 522,322 24,158 19,267 -4,891 -10,938 -19,195 -8,257 -3,971 -17,119 30,626 5.9% -5,937 ISP 34,056 363,842 17,362 12,314 -5,048 -5,701 -9,883 -4,182 -4,480 -13,709 25,282 6.9% -187 BAPO 7,322 99,702 3,126 1,604 -1,522 -1,451 -2,736 -1,285 -693 -3,500 5,071 5.1% -1,908 UBI 7,457 100,407 3,182 2,184 -998 -1,312 2,184 0 -857 -1,855 6,437 6.4% -592Germany DB 35,859 508,851 19,517 10,594 -8,923 -3,828 -7,916 -4,088 -1,146 -14,158 26,656 5.2% -8,963 CBK 24,102 285,658 9,210 3,679 -5,531 -3,893 -7,471 -3,578 -2,770 -11,879 14,955 5.2% -5,041UK Barclays 48,188 595,518 24,699 17,340 -7,359 -10,550 -12,764 -2,214 -1,036 -10,609 40,338 6.8% -1,348 Lloyds 40,002 496,726 24,456 19,097 -5,359 -15,680 -31,544 -15,864 -4 -21,227 24,294 4.9% -10,477 HSBC 102,714 1,109,414 57,115 25,308 -31,807 -14,548 -22,725 -8,177 -126 -40,110 72,174 6.5% -5,485 RBS 60,527 691,954 22,902 9,454 -13,448 -13,570 -25,894 -12,324 -598 -26,369 41,014 5.9% -7,423Spain Santander 60,404 651,520 49,304 43,694 -5,610 -19,681 -29,773 -10,092 -3,237 -18,940 46,444 7.1% 838 BBVA 30,011 335,982 22,560 20,305 -2,255 -8,054 -12,455 -4,401 -2,140 -8,796 23,462 7.0% -57

Popular 8,604 94,659 4,190 3,064 -1,126 -2,649 -6,490 -3,841 -1,229 -6,196 4,205 4.4% -2,421 Bankinter 2,662 32,913 844 622 -222 -287 -1,058 -771 -59 -1,051 1,895 5.8% -409 Sabadell 5,106 56,741 1,903 1,574 -329 -994 -2,739 -1,745 -669 -2,743 3,049 5.4% -923Nordics Nordea 22,767 227,558 9,650 6,459 -3,191 -1,435 -4,299 -2,864 0 -6,054 18,257 8.0% 2,328 SEB 12,157 92,679 3,472 2,241 -1,231 244 -1,485 -1,729 -24 -2,984 9,770 10.5% 3,282 Swedbank 9,295 67,737 3,472 2,641 -831 242 -1,167 -1,409 0 -2,240 7,565 11.2% 2,823 Danske 15,017 141,732 5,449 5,595 0 -2,060 -3,814 -1,754 0 -1,754 13,789 9.7% 3,868 SHB 9,178 76,929 3,615 3,790 0 -254 -1,309 -1,055 0 -1,055 8,397 10.9% 3,012 DNB 14,918 135,972 5,589 4,373 -1,216 -664 -2,280 -1,616 0 -2,832 12,737 9.4% 3,219Portugal BCP 4,234 57,152 2,358 1,093 -1,265 -1,231 -2,536 -1,305 -1,405 -3,975 1,003 1.8% -2,998 BES 6,079 72,988 2,356 1,471 -885 -773 -2,016 -1,243 -534 -2,662 3,949 5.4% -1,160CEEMEA Erste 11,446 143,803 7,963 6,020 -1,943 -2,330 -5,268 -2,938 -127 -5,007 7,526 5.2% -2,540 RBI 7,282 104,135 5,401 3,658 -1,743 -1,837 -2,784 -947 -35 -2,725 5,286 5.1% -2,004 EFG 4,818 48,590 2,843 2,481 -2,046 -5,638 Piraeus 3,909 40,072 1,407 1,348 -1,061 -3,572Total -79,708

Source: J.P. Morgan estimates EBA. Note: Basel 3 Common Equity Tier I ratios assuming no phasing of capital deductions. Société Générale: our starting Basel 3 Common Equity of 7.5% excludes a) the €1.2bn positive impact from paying 2012e

dividends in shares mid-2013, and b) the positive impact from additional mitigation initiatives with the group targeting 9% Common Equity Tier I end 2013 including at least 50bp of additional mitigation.

8



Country Analysis

German Banks

As per expectations, DBK, and CBK passed the stress test, reaching core Tier 1 ratios of 6.5% and 6.4%, respectively, under the adverse scenario at 31st Dec 2012. However, under the JPM Acid Test scenario, including banking book haircuts on sovereign exposures, DBK and CBK need €9.0bn and €5.0bn of capital,respectively, to reach 7% Basel 3 common equity Tier 1 ratio in 2012E.

Deutsche Bank

Under the EBA methodology, DB reaches a core Tier 1 ratio of 6.5% as of 31st Dec 2012, in an adverse scenario which is well above the core Tier 1 ratio of 5% required under EBA stress test.

However, under the JPM acid test methodology taking haircuts on the banking book exposure of DB to GIIPS countries, and using Basel 3 RWAs of €509bn under JPMe which factors in the RWA increase from Basel 2.5 and Basel 3 and also gives benefits of mitigation actions as guided by the companies, DB reaches a Basel 3 common equity Tier 1 Ratio of 5.2% in 2012E. This implies DB needs €9.0bn of additional capital to reach 7% Basel 3 common equity Tier 1 ratio in 2012E under the JPM acid test methodology.

Please note we only take a haircut on the AFS banking book which is disclosed with the stress test as it is not clear to us how much of the exposure would be HTM.

We would like to point out that the EBA stress tests assume €10.6bn of 2 yr cumulative operating profit before impairments in 2011-12 for DB, which looks very harsh in our view with DB having already reported €3.3bn of pre-provision profits in Q1 11. We estimate pre-provision profits of €19.5bn in 2011-2012 for DB and thus the low pre-provision profit numbers used by EBA have a major negative impact on our calculation. Impairment losses on banking book under EBA stress tests is €7.9bn for 2011-12 vs. JPMe provisions for loan losses of €3.8bn in our model.

Under the EBA stress test methodology, RWAs for DB increase by c.26% to €435bn from RWAs of €347bn in 2010 in the baseline scenario with €85bn of RWAs in the trading book. Under the adverse scenario, RWAs increase further to €500bn which is a 44% increase over 2010 RWAs of €347bn with €110bn of RWAs in trading book.

DB also gives detailed sovereign exposures to the different countries. Within the GIIPS countries, DB has €5.3bn of net direct positions in Italy of which €1.2bn is in the trading book. DB has €2.1bn of net direct positions in Spain of which €0.3bn is in the trading book. The sovereign exposures to Portugal and Ireland are relatively very small.

Looking at the credit risk exposures, EAD to peripheral countries is also not of concern in our view with limited CRE and Residential mortgage exposure to GIIPS countries. The highest Residential mortgage exposure amongst peripheral countries is to Spain (€7.5bn) followed by Italy (€6.3bn). In CRE, the highest exposure is to Spain (€1.3bn) followed by Italy (€1.1bn).

Stress Test assumptions of €10.6bn of pre-provision profits

for DB in 2011-12 is very harsh

in our view, with DB already having reported pre-provision

profits of €3.3bn in Q1 11 alone.

9



Thus, the sovereign exposures to peripheral countries is not a big concern for DB in our view, however its low starting Basel 3 common equity Tier 1 ratio of 7.0% in 2012E under JPMe provides limited cushion to absorb losses.

Commerzbank

Under the EBA methodology, CBK reaches a core Tier 1 ratio of 6.4% as of 31st Dec 2012, in an adverse scenario which is well above the core Tier 1 ratio of 5% required under EBA stress test.

However, taking haircuts on the banking book exposure of CBK to GIIPS countries, and using Basel 3 RWAs of €286bn under JPMe which factors in the RWA increase from Basel 2.5 and Basel 3 and also gives benefits of mitigation actions as guided by the companies, CBK reaches a Basel 3 common equity Tier 1 Ratio of 5.2% in 2012E. This implies CBK needs €5.0bn of additional capital to reach 7% Basel 3 common equity Tier 1 ratio under JPM acid test methodology. Please note we take a haircut on the net positions excluding the trading book as HTM portfolio is not disclosed with the stress test.

We would like to point out that the EBA stress tests assume €3.7bn of 2 yr cumulative operating profit before impairments in 2011-12 for CBK, which looks very harsh in our view with CBK having already reported €1.4bn of pre-provision profits in Q1 11. We estimate pre-provision profits of €9.6bn in 2011-2012 for CBK and thus the low pre-provision profit numbers used by EBA again have a major negative impact on our calculation. Impairment losses on banking book under EBA stress test is €7.5bn vs. JPMe provisions for loan losses of €3.9bn in our model.

Under the EBA stress test methodology, RWAs for CBK increase by c.11% to €297bn from RWAs of €268bn in 2010. Under the adverse scenario, RWAs increase further to €347bn which is a 30% increase over 2010 RWAs of €267bn.

Looking at sovereign exposure to peripheral countries, CBK has €3.0bn of net direct positions in Greece of which €63mn is in the trading book. In Italy CBK has €10.1bn of net direct positions of which €0.2bn is in the trading book. CBK also has €3.2bn of net direct positions in Spain of which only €38mn is in the trading book. The sovereign exposures to Portugal and Ireland are relatively small.

Iberian banks

The Bank of Spain reported 5 Spanish banks failing the European tests carried out by the EBA, below the 9 banks reported in February 2011, in what we consider was not a very stress-tested exercise. Banco Pastor, CAM, UNNIM, Catalunyacaixa and Caja3 failed the tests, although including mitigating factors all of them passed these levels. On top of this a number of banks dropped below 6% pre-mitigating measures, including Bankinter, Sabadell and Popular. BBVA and Santander stood at 9.2% and 8.4% respectively, whilst Banca March was the outlier with 28% CT1.

EBA stress tests released for Spanish banks by the Bank of Spain were in our view not stress tested enough, where disclosed information will be the most useful element. The tests used lighter credit losses assumptions than in 2010 (22% lower on average), optimistic pre-provision profits and a €120bn drop in exposure to real estate developers and construction likely to raise some questions.

Stress Test assumptions of

€3.7bn of pre-provision profits

for CBK in 2011-12 is also very harsh in our view with CBK

already reporting pre-provision

profits of €1.4bn in Q1 11.

10



It’s worth noting how mandatory convertible bonds and generic provisions were excluded from core capital by the test, included below as “mitigating factors”, having a large impact on all main banks under our coverage with such products inside their core capital structure.

Expected losses in landbank (-47%) and housing (-22%) seem low in our view, as companies in the real estate market are already reporting drops below those levels.

Convertible bonds are excluded unless they convert before end 2012. This is especially relevant for SAN as it has €7bn of convertible bonds maturing withinthis period (115bps). For other banks this amount is deducted from core tier I but stated as part of mitigating measures below. As an example, BBVA €2bn convertible bonds converted into 273mn shares in July although they are consider as mitigating measures under the stress test.

Some banks reported large drops in core tier I capital relative to reported figures. This was due to the removal of the items stated above and was significant for Santander (-21%), BBVA (-17%), Popular (-24%), or Sabadell (-29%) relative to their FY10 reported figures.

RWA inflation was just 2% on average for Spanish banks until 2012, except SAN (+10%), BBVA (+3%). While this looks low, we don’t expect to see large increases in RWAs in Spain, as banks delever.

Total capital needed under a stressed scenario would be just €143mn according to the Bank of Spain. This seems very unrealistic to us, considering there is a €3trn balance sheet and banks are suffering from almost no access to wholesale funding (partly because of capital concerns).

Pre-provisions profits were more credible this time, but not far from consensus estimates. The tests used a total 2Y cumulative pre-provision profit of €79bn vs. €99.5bn for last year stress test, which looks optimistic to us even under current market conditions and where SAN and BBVA would account for 78% of total, only 17% below current consensus estimates.

Impacts of “dividends and other” changed from €5.5bn negative in 2010 to €3.8bn positive in 2011.

Following the JPM methodology, we achieve a €3.8bn capital shortfall for the banks under our coverage universe to reach 7% Core Tier I (5% of aggregated market cap, 0.5% of GDP). This figure looks manageable to us, although some investors may argue this ratio is not enough, especially for larger institutions and increasing it would yield significant shortfalls. We disagree with the test’s expected losses hypothesis, as not only are they lighter than in 2010 but they look too optimistic under a tough economic downturn. Expected losses under an adverse stress scenario stood at 5.4% vs. 7.3% in 2010 stress test (table below). Our current expected loss ratio stands closer to 9.8% for saving banks and 8.1% for private banks.

11



Table 8: Benchmark scenario: 2011 vs. 2010 stress test

Credit Losses Credit Losses (% of Total) Total Exposure €bn ∆ YoY (%)2010 2011 2010 2011 2010 2011 Credit losses

Total Credit Losses 146,608 118,071 5.2% 3.8% 2,819 3,107 -27%Financial Institutions 1,988 685 0.6% 0.1% 331 685 -83%Corporates 18,242 18,947 3.2% 2.8% 570 677 -13%Real estate developers + R.E. Assets 63,679 46,705 14.5% 14.4% 439 324 -1%SMEs 18,269 17,873 6.0% 6.3% 304 284 5%Mortgages 13,884 9,047 1.6% 1.0% 868 905 -38%Other Retail 30,546 24,814 10.6% 11.2% 288 222 6%Sovereign Risk + Other 10,429 3,880 0.4% 0.1% 2,607 3,880 -75%Gross Deterioration 157,037 121,951 5.6% 3.9% 2,804 3,127 -30%

Source: EBA, CEBS, Bank of Spain.

Table 9: Adverse scenario: 2011 vs. 2010 stress test

Credit Losses Credit Losses (% of Total) Total Exposure €bn ∆ YoY (%)2010 2011 2010 2011 2010 2011 Credit losses

Total Credit Losses 173,618 159,175 6.1% 5.1% 2,846 3,121 -16%Financial Institutions 2,273 1,313 0.7% 0.2% 325 657 -71%Corporates 22,904 26,864 4.0% 4.0% 573 672 0%Real estate developers + R.E. Assets 76,012 65,900 17.3% 20.3% 439 325 17%SMEs 22,968 23,312 7.6% 8.2% 302 284 8%Mortgages 15,345 13,405 1.7% 1.5% 903 894 -12%Other Retail 34,116 28,381 11.8% 12.8% 289 222 8%Sovereign Risk + Other 33,854 9,635 1.2% 0.3% 2,821 3,212 -75%Gross Deterioration 207,473 168,811 7.3% 5.4% 2,842 3,126 -26%

Source: EBA, CEBS, Bank of Spain.

Regarding Portuguese banks, both BCP and BES managed to pass the EBA tests with 5.4% for BCP and 5.1% for BES, including mitigating measures under an adverse scenario. Applying our own methodology we obtain a capital shortfall of €3bn for BCP and €1.1bn for BES or €4.1bn for both. The shortfall is basically due to the Basel III impact (for BCP) although BES sale in Bradesco will help reduce its impact from Basel III to 30bp under our assumptions.

Italian Banks

Following the JPM methodology, none of the Italian banks would have passed the acid test. ISP is at 6.9% with a minimal gap of €0.2bn. UCG is the bank with the highest capital shortfall in the Italian universe equal to €5.9bn while BAPO shows the lowest JPM stress Basel 3 ratio in the Italian universe at 5.1%. UBI shows a capital gap of €0.6bn which looks manageable in our view.

At first glance the stress exercise doesn’t seem too much stressed, in our view, and we highlight our main findings below:

Net Interest Income The comparison between NII 2010 and NII 2012 under the adverse scenario shows an average contraction of 1.8% CAGR10-12E for the Italian universe. We understand that the assumptions include an increase in interest rates due to the sovereign shock but we find difficult to find it consistent with an increase in the cost of funding of almost 52% per annum for the universe.

CAGR10-12 on provision under the adverse scenario : The increase in provisions from defaulted assets from 2010-2012, according to the numbers reported in the additional information disclosed in the stress test template, is on average 27% per year. If we compare this number with the CAGR07-10 recorded

12



for our universe which was circa 23%, again this does not seem too aggressive in our view.

Pre-provision profit 2012: The pre-provision profit for the adverse scenario is only 20% lower than the number we obtain annualizing the pre-provision profit posted in the Q111 by each bank. Considering also that Q111 numbers are usually inflated by a lower provision we would have expected to see a higher difference.

RWA increase: The increase in the RWA under the adverse scenario seems mild to us: on average 4% growth per year, but we would have expected an higher number considering that under the adverse scenario is likely to have a significant impact arising from rating migration within the loan book which should trigger an higher capital absorption.

Furthermore, is worth to mention that despite the base line scenario is based on static balance sheet assumptions, plus additional constraints (i.e. no improvement on costs etc.), however the difference between the net income for 2011 versus the Bloomberg consensus estimates for the same year are 7% lower for UCG, 31% and 47% lower for ISP and UBI respectively while for BAPO the two numbers are in line.

In conclusion the exposure to peripheral remains limited in the Italian universe. The JPM exercise takes a more severe approach on sovereign haircuts on the banking book where a lot of Italian government bonds are held and this explains mainly why none of the Italian banks are above the 7% threshold set in the JPM acid test. It is also true that the low profitability and therefore the limited pre-provision buffer does not offer much support in a scenario of rising provisions.

French banks

Conservative EBA assumptions for French banks leading to significant capital shortfalls based on our acid test

We estimate BNP Paribas Basel 3 Common Equity Tier I ratio would drop to 5.3% from 8.5% in 2012, and Société Générale to 5.3% from 7.5% in our acid test, based on our methodology as well as EBA’s conservative earnings assumptions. This would imply capital shortfalls of €12.1bn for BNPP and €7.7bn for SG vs. our minimum requirement of 7%. This is based on:

EBA conservative cumulative pre-provision profits which are 40%-50% below our current 2012 estimates: of €18.4bn for BNPP, 50% below our base case estimate of €36.9bn in 2012, and €11.5bn for SG, 43% below our estimate of €20.4bn. Profits under the adverse scenario are significantly below our current estimates as the EBA stress test assumes a static balance sheet, i.e. no growth –vs. our 2-3% revenue growth CAGR 11-12e – and no adjustments to costs and margins.

EBA realistic cumulative impairment losses on banking book of €16.2bn for BNPP and €9.5bn for SG, 70-120% higher than our current estimates. For SG, €9.5bn of cumulative provisions would be marginally lower than the €10.0bn booked in 2009-10. For BNPP however, €16.3bn of provisions would be 23% higher than the 2009-10 levels.

EBA conservative trading losses assumptions of €3.0bn for BNPP and €4.3bn for SG, included in the pre-provisions profits estimates in EBA’s adverse

13



scenario. This is to be compared to trading losses of about €4bn for BNPP (split €2bn in equities and €2bn in FICC) and €2.5bn for SG (split €1bn in equities and €1.5bn in FICC) in 2008. This would be more penalizing for SG due to its legacy assets portfolio - EBA assumption of a static balance sheet implies no deleveraging for SG’s legacy assets. EBA stress test also does not assume any cost offsets for both years, on the contrary, group costs even increases by 17% in BNPP's case, which is unrealistic in our view.

JPMe additional losses on sovereign AFS exposures of €5.0bn for BNPP and €1.2bn for SG, on top of EBA’s losses of €0.5-0.6bn for sovereign trading exposures. The additional €5.0bn of losses for sovereign shock for BNPP mainly results from Greece (€1.8bn) and Italy (€2.2bn).

Although EBA stress tests did not assume haircuts on sovereign banking book exposures, the adverse scenario for French banks was conservative in our view. The EBA’s stress test assumes both BNPP and SG make not much money for 2 years. Net profits remain however positive despite the stress conditions, underlying the French banks’ cashflow generation capacity.

The assumption for 2011 is €2.9bn of net profits for BNPP vs. €2.6bn achieved in Q1 11, and €655m for SG in 2011 vs. €913m in Q1 11.

In 2012, assumed net profits amount to only €61m for BNPP in the adverse scenario vs. EBA base case of €8.6bn and JPMe €9.4bn, and for SG, stress net profits of €1.3bn vs. EBA base case of €4.0bn, JPMe €5.4bn and SG target of €6.0bn.

In conclusion, we view the EBA stress assumptions as credible overall, although we note that pre-provision assumptions are very conservative in our view, accounting for no adjustments from banks on costs/margins nor balance sheet management. Based on our acid test which is even more conservative as: a) it is based on Basel 3 Common Equity Tier I of 7% minimum (assuming no phasing of capital deductions) and b) it assumes haircuts on sovereign banking book exposures, we estimate that BNPP and SG would need to raise €12.1bn and €7.7bn respectively. Some of it could be achieved through cost reduction, RWAs optimization and dividend cuts (which we have not assumed, unlike in the EBA stress test).

Note that the EBA stress test exercise is applied to Credit Agricole Group and BPCE rather than the listed entities, CASA and Natixis, respectively. We only have forecasts for CASA and Natixis, and have not run Acid Tests for Credit Agricole Group and BPCE.

14



Table 10: EBA stress test vs. JPMe acid test

€ million

BNP Paribas Société Générale

BPCE Credit Agricole group

Total/Average

EBA Stress Test -Core Tier I ratio end 2010 9.2% 8.1% 7.8% 8.2% 8.3%Core Tier I base end 2012 9.8% 8.3% 8.5% 9.4% 9.0%

Total impairment and losses in EBA stress test -19.3 -13.9 -9.9 -20.1 -63.1 ow impairment losses in the banking book -16.2 -9.5 -7.9 -17.0 -50.7 ow losses from the stress in the trading book -3.0 -4.3 -2.0 -3.0 -12.3EBA stress test impact on Tier I ratio end 2011 -1.9% -1.7% -1.8% -0.9% -1.6%

Core Tier I ratio under EBA stress test end 2012 7.9% 6.6% 6.7% 8.5% 7.4%

JPM stress test -Basel 3 Common Equity Tier I end 2012e 8.5% 7.5% - - -

Total impairment and losses in JPMe stress test -24.3 -15.0 - - - ow impairment losses in the banking book -16.2 -9.5 - - - ow losses from the stress in the trading book -3.0 -4.3 - - - ow additional losses due to sovereign shock -5.0 -1.2 - - -Acid test impact on Core Tier I ratio 2011E -3.2% -2.2% - - -

Basel 3 Common Equity Tier I under JPM stress test end 2012e 5.3% 5.3% - - -Excess capital vs. min of 7% 2012E -12.2 -7.7 - - -

Source: J.P. Morgan estimates, EBA. Note: Basel 3 Common Equity Tier I ratios assuming no phasing of capital deductions. Société Générale: our starting Basel 3 Common Equity of 7.5%

excludes a) the €1.2bn positive impact from paying 2012e dividends in shares mid-2013, and b) the positive impact from additional mitigation initiatives with the group targeting 9% Common Equity

Tier I end 2013 including at least 50bp of additional mitigation.

UK Banks

As per the expectations, all UK banks passed the EBA stress test with 7.3%, 7.7%, 6.3%, 8.5% 2012E Core Tier 1 ratios under adverse scenario for Barclays, Lloyds, RBS and HSBC respectively. However, against the JPM Acid test, we see a 16% -40% hit to JPMe 2012E B3 CET1 ratios and combined capital deficit of €25bn for UK Banks with the greatest impact coming from conservative operating profit and impairment charge estimates than from haircut on sovereign debt. We estimate a 16%, 40%, 30% and 32% decline in 2012E Basel III ratios for Barclays, Lloyds, HSBC and RBS respectively. We also note that UK Banks’ exposure to Portugal, Italy, Ireland, Greece and Spain sovereign debt is small ranging from €40mn for Lloyds to €7.8bn for Barclays (mainly to Spain - €5.2bn).

• Barclays – Based on our JPM Acid Test, we estimate €1.3bn capital shortfall with the JPM Acid Test Ratio at 6.8% vs. EBA adverse scenario ratio at 7.3% with most of the difference arising due to our starting point being fully loaded 2010 Basel III CET1 ratio of 7.1% compared to 10.0% used by EBA, due to higher capital deductions with JPMe 2010 B3 Capital €42bn vs EBA €46bn and higher RWAs JPMe B3 RWAs €589bn vs EBA €461bn. According to the results published, i) estimates for 11/12E provisions on banking book are €13bn which compare to JPM estimates of €11bn; (ii) estimates for 11E/12E pre provision profits in the adverse scenario are €17bn which compare to JPM estimates of €25bn. Note that in the benchmark scenario Barclays will have €542bn RWAs 2012E which rises by c.21% to go up to €657bn in the adverse scenario compared to €596bn that we estimate under Basel III post mitigation. Compared to our B3CET1 ratio of 8.1%, we estimate 6.8% under JPM Acid Test due to €7bn lower 11E/12E PPOP and €2bn higher 11E/12E impairment charges.

15



• Lloyds Banking Group – In the adverse scenario EBA estimates 7.7% Core Tier 1 ratio for Lloyds compared to 4.9% under JPM Acid Test - a capital deficit of €10.5bn. The difference in capital ratios arising mostly from our starting point being fully loaded 2010 Basel III CET1 ratio of 5.7% with higher capital deductions mostly arising from insurance and DTAs vs. 10% used by EBA. According to the results published, i) estimates for 11/12E provisions on banking book are €32bn which compare to JPM estimates of €16bn; (ii) estimates for 11E/12E pre provision profits in the adverse scenario are €19bn which compare to JPM estimates of €24bn. Compared to our B3CET1 ratio of 8.1%, we estimate 4.9% under JPM Acid Test due to €5bn lower 11E/12E PPOP and €16bn higher 11E/12E impairment charges.

• RBS – In the adverse scenario EBA estimates 6.3% Core Tier 1 ratio for RBS compared to 5.9% under JPM Acid Test - a capital deficit of €7.4bn. The difference in capital ratios arising due our starting point being fully loaded 2010 Basel III CET1 ratio of 6.1% to 9.7% used by EBA due to higher capital deductions with JPMe 2010 B3 Capital €43bn vs. EBA €59bn and higher RWAs JPMe B3 RWAs €696bn vs EBA €607bn compared. According to the results published, i) estimates for 11/12E provisions on banking book are €26bn which compare to JPM estimates of €14bn; (ii) estimates for 11E/12E pre provision profits in the adverse scenario are €9bn which compare to JPM estimates of €23bn. Whilst the EBA stress tests are based on static balance sheet assumptions, our estimates include substantial RWA reduction in noncore where we estimate RWAs to decline by c. £94bn by 2012E as part of the Group’s strategy, slightly offsetting the impact due to conservative operating profit and impairment losses. Compared to our B3CET1 ratio of 8.7%, we estimate 5.9% under JPM Acid Test due to €13bn lower 11E/12E PPOP and €12bn higher 11E/12E impairment charges.

• HSBC – In the adverse scenario EBA estimates 8.5% Core Tier 1 ratio for HSBC compared to 6.5% under JPM Acid Test - a capital deficit of €5.5bn. The difference in capital ratios arising mostly from our starting point being fully loaded 2010 Basel III CET1 ratio of 8.1% vs 10.5% used by EBA. According to the results published, i) estimates for 11/12E provisions on banking book are €23bn which compare to JPM estimates of €15bn; (ii) estimates for 11E/12E pre provision profits in the adverse scenario are €25bn which compare to JPM estimates of €57bn which we believe is overly conservative and note that in the past 8 years HSBC has consistently generated PPOP >36bn for 2 years on a cumulative basis vs. EBA adverse scenario estimate of €25bn. Compared to our B3CET1 ratio of 9.3%, we estimate 6.5% under JPM Acid Test due to €32bn lower 11E/12E PPOP and €8bn higher 11E/12E impairment charges.

CEEMEA banks

Austrians- Erste and Raiffeisen cleared the EBA stress test comfortably, with an adverse scenario core tier 1 of 8.1% and 7.8% respectively. On our JPM acid test, we see 12E Basel 3 levels at 5.2% for Erste and 5.1% for RBI - declining from 8% and 7% (Basel 3 CET1) respectively. The difference between EBA and JPM acid test numbers can be explained by

1. Estimates for pre-provision income are more conservative than JPM estimates - Erste’s 11-12 cumulative pre-provision income under the EBA

16



adverse scenario comes at €6bn, which compares to €8bn under JPM estimates (ie. 24% below our estimates). For RBI EBA pre-provision profit figures are 32% below our estimates.

2. EBA impairment charges are significantly higher than JPM estimates -Erste’s 2year cumulative impairment charges under EBA come at €5.3bn, which compares to €2.3bn under JPM (ie. 126% higher than our estimates). EBA tests have incorporated c. 3.6% cumulative provisioning rate on corporate book, whilst 1.6% for retail exposures. Erste’s total commercial real estate exposure stands at €22bn (10% of total credit exposure), for which 3.8% cumulative loss rate is applied. Overall these impairment charges translate to an average 198bps cost of risk over 2 years, which is higher than 2009-10 levels of 150-160bps.

For RBI, 2 year EBA impairment charges of €2.8bn are c.52% higher than JPM estimates. These numbers incorporate a 1.5% cumulative loss rate on corporate exposure, whilst a 6.5% loss rate for retail exposures (vs. 1.6% for Erste). This highlights the difference in quality of Erste’s and RBI’s retail book and different geographical risk profile more Central Europe(Erste) vs, more ex-CIS(RBI). Total commercial real estate exposure stands at €3.5bn (c. 2%).

Overall these numbers for pre-provision and impairment charges for a stressed scenario looks conservative to us.

3. The main reason for the difference between JPM acid test and EBA capital levels is the use of Basel 3 equity capital and RWA for JPM acid test vs. core tier 1 levels for EBA. In addition we do not include participation capital within our estimates- which amounts to €1.7bn for Erste and €2.5 for RBI. Including this participation capital, the JPM acid test Basel 3 capital levels would improve for Erste and RBI.

We do highlight that sovereign exposure of Austrians to peripheral countries is low- hence the negative impact from banking book haircut scenario is limited.

Greeks- we have not included the Greek banks into our JPM acid test as the results distort the overall picture for European banking system. Greek banks are facing considerable headwinds and despite the recent capital enhancing measures, they remain vulnerable to sovereign default risks. In the event of Greek sovereign default, most of the Greek banks would require additional capital – from the Greek state or EU/IMF. In addition liquidity position of the banks would also come under pressure.

Within the EBA stress tests, 2 Greek banks failed, Agricultural Bank of Greece and EFG Eurobank, with core tier 1 of -0.8% and 4.9% respectively. Post mitigating factors both banks pass the minimum 5% threshold- however the mitigating factors are more credible for Eurobank than for ATE. For EFG, positive impact from sale of Polbank to RBI, which adds c.120bps to core capital and absorption of DIAS, which adds c.10bps to capital are not considered. For ATE, utilization of generic provisions is the main mitigating factor.

With respect to stress test numbers, pre-provision income figures look weak- 2 year cumulative pre-provision income under adverse scenario are only 13% below our estimates for EFG and 4% below for Piraeus.

17



However we do highlight that loan loss impairment estimates used within EBA adverse scenario are considerably higher than our estimates. For EFG, 2 year cumulative impairment charges amount to €5.7bn, in comparison to €2bn under JPM (2yr cum. corporate loss rate of 7.1%; retail 6.2%). Similarly for Piraeus, €3.6bn of EBA impairments compare to €1.1bn JPMe. From our discussion with banks, we can conclude that these numbers also include provision charges on sovereign exposures within investment book (ie. impairment charges on sovereign book to reflect for worsening macro/credit ratings).

Nordic banks

No Surprises

Against the JPM acid test all the Nordic banks delivered B3 equity ratios above 8%(Nordea the lowest at 8.0% and Swedbank the highest at 11.2%), with an 8% - 20% hit to JPM 2012E B3 equity based on our acid test assumptions. We saw a 9% negative B3 equity impact for SHB, 8% for Danske, 15% for DnB NOR, 19% for Swed,20% for SEB and 20% for Nordea coming from the generally more conservative EBA figures on adverse scenario pre-provision profits and loan losses. Even the EBA base line profit scenario is on average 15% below consensus, with the exception being Danske where the EBA baseline is 35% ahead and the adverse scenario is also above JPMe profit expectations. However, even within these conservative figures we find assumptions which are more favourable than may be expected for a stressed scenario, for example only 50bp negative funding cost impact for Nordea compared to ~200bp for the other Nordics, corporate loan losses as low as 50bp and CRE losses as low as 20bp in the adverse scenario, and coverage as low as 11% for CRE and lower risk weighted assets in the adverse scenario than in the base line for all Nordics except SEB.

Against the EBA stress test as expected the Nordic banks showed solid resilience all delivering adverse scenario tier one ratios above 8.6%, with SHB the lowest at 8.6% and Danske the highest at 13%. In addition to the relatively high expectations for cumulative net profits, we believe Danske’s number is somewhat overstated due to the inclusion both of the 26bn DKK government hybrid in core capital and the 20bn DKK rights issue proceeds which Danske’s management intends to use to repay that government hybrid capital.

We note two additional important differences between the EBA methodology and our ratios. Firstly the EBA has only considered the current reporting of RWAs whilst the Swedish banks and DnB NOR still report under transitional Basel 2 rules, which has a negative impact of 140bp for Nordea, 127p for SEB, 380bp for Swed, and 220bp for DnB NOR based on FY2010 core tier one ratios (and a negative impact 730bp based on total tier one for SHB). Secondly the EBA has not considered the mandatorily convertible preference shares which Swedbank issued in its 15bn SEK August 2009 rights issue, convertible by August 2013 and equivalent to 200bp of tier one capital.

In general exposure levels to Portugal, Italy, Ireland, Greece and Spain sovereign debt, which were already very small in the 2010 stress test, have fallen to almost zero in the banking books for the Nordic banks.

18



Appendix

Table 11: AFS (sovereign) exposures by country

€ mn UCG ISP BAPO UBI SAN BBVA POP SAB BKT PAS SocGen BNP CAGroup

Barclays Lloyds

Austria 1,688 4 - - - - - - - - 300 1,190 738 - -Belgium 134 36 - - - - - - - - 158 23,723 2,189 1,543 -Bulgaria 124 - - - - - - - - - - 6 - - -Cyprus - - - - - - - - - - - 75 - - -Czech 1,195 27 - - - - - - - - 2,632 165 0 - -Denmark - - - - - - - - - - - - 0 - -Estonia - - - - - - - - - - - - - - -Finland 32 - - - - - - - - - - 523 506 - -France 130 3 - - - - - - - - 5,166 16,287 17,567 182 505Germany 231 136 - - - - - - - - 300 8,342 319 148 1,236Greece 229 236 21 - - 20 - - - - 1,753 4,539 242 - -Hungary 297 256 - - - - - - - - 13 796 - - -Iceland - - - - - - - - - - - - - - -Ireland 47 113 - - - - - 38 - - 302 433 77 240 -Italy 21,815 11,702 3,916 7,777 - 1,901 - - - - 2,197 21,835 7,303 1,377 -Latvia - - - - - - - - - - - - - - -Liechtenstein - - - - - - - - - - - - - - -Lithuania - 20 - - - - - - - - - 35 2 - -Luxembourg - - - - - - - - - - - 463 - -Malta - - - - - - - - - - - - - - -Netherlands 114 3 - - - - - - - - 111 9,386 518 - -Norway - - - - - - - - - - - 101 0 - -Poland 3,884 20 - - 1 - - - - - 298 2,879 95 - -Portugal 45 45 - - 2,362 - 436 91 - - 200 1,785 858 1,030 -Romania 927 61 - - - - - - - - 936 76 16 - -Slovakia 425 1,318 - - - - - - - - 57 32 - - -Slovenia 143 83 - - - - - - - - 123 61 - 31 -Spain 1,440 6 198 - 25,285 13,180 4,943 6,303 586 68 902 3,156 1,810 5,172 40Sweden 5 - - - - - - - - - 100 31 0 - -UK - - - - 145 - - - - - 530 1,424 150 13,881 5,513Total 34,607 14,640 4,143 7,777 57,736 26,315 5,415 6,433 586 68 25,975 168,632 36,612 29,801 13,453

Source: EBA

19



Table 12: AFS (sovereign) exposures by country

€ mn HSBC RBS Danske Nordea Swedbank SEB SHB BCP BPI BES DBK CBK Erste RBI KBC Piraeus EFGAustria - 162 - - - - - - - - 1,211 463 2,359 - 304 - -Belgium 87 800 - - - 41 - - - - 2,207 79 53 - 15,819 - -Bulgaria - - - - - - - - - - - - 1 - 27 - 119Cyprus - - - - - - - - - - - - 6 - - - -Czech 223 101 19 - - - - - - - 52 27 30 - 2,291 - -Denmark 1,113 632 - - - 671 - - - - - - - - - - -Estonia - - - - - - - - - - - - - - - - -Finland - 30 - - - - - - - - 98 35 13 - 82 - -France 6,369 6,596 - - - 561 - - - - 3,711 157 4 - 1,539 - 160Germany 7,295 6,581 - - - 3,304 - - - - 8,894 11,469 434 - 18 - 258Greece 189 1,044 - - - 50 - - 325 309 1,277 372 70 - 206 1,137 142Hungary - - 42 - - - - - - - 42 50 31 - 517 - 36Iceland - - - - - - - - - - - - - - - - -Ireland - 121 - - - - - - 283 - 218 - 22 - 92 - -Italy 506 1,057 - - - 155 - - 972 - 4,512 4,236 64 58 1,748 - -Latvia - - - - - 28 - - - - - - 2 - - - -Liechtenstein - - - - - - - - - - - - - - - - -Lithuania - - 26 - - 48 - - - - - 25 3 - - - 28Luxembourg 204 - - - - - - - - - 23 10 22 - 7 - -Malta 244 - - - - - - - - - - - 0 - - - -Netherlands 540 3,901 - - - - - - - - 899 - 25 - 78 - -Norway 19 - - - - - - - - - - - - - - - -Poland 1,209 107 - - - - - 870 - - 419 3,318 64 57 1,542 - 342Portugal - 108 - - - 67 - 23 2,614 1,362 50 - 6 - - - -Romania - 304 - - - - - 71 - - - - 1,251 5 - 125 350Slovakia - 21 - - - - - - - - - - 858 - 654 - -Slovenia - - - - - - - - - - 10 - 63 - - - -Spain - 56 - - - 44 - - - 17 1,038 109 33 - 1,302 - -Sweden 18 - - - - 3 - - - - 90 - - - - - -UK 20,833 9,772 - - - - - - - - 898 - - - - - -Total 168,732 62,098 87 - - 4,971 156 1,324 5,758 3,862 29,238 20,378 6,082 127 26,400 1,314 2,049

Source: EBA

20



Table 13: Direct Sovereign exposure in derivatives

€mn UCG ISP BP UBI SAN BBVA POP SAB BKT PAS SocGen BNP CAGroup

Barclays Lloyds

Austria 81 0 0 0 0 0 0 0 0 0 0 -80 9 101 0Belgium 0 0 0 0 0 0 0 0 0 0 -91 0 41 -562 5Bulgaria 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Cyprus 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0Czech 0 0 0 0 0 0 0 0 0 0 5 0 0 2 2Denmark 0 0 0 0 0 0 0 0 0 0 -38 -29 -36 -12 0Estonia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Finland 0 0 0 0 0 0 0 0 0 0 40 26 44 -140 0France 0 0 0 0 0 0 0 0 0 0 -125 -422 468 395 0Germany 53 0 0 0 0 0 0 0 0 17 -252 -90 -164 786 0Greece 0 9 0 0 0 0 0 0 0 0 29 207 -47 -1 0Hungary 0 0 0 0 0 0 0 0 0 0 -166 0 -28 6 0Iceland 0 0 0 0 0 0 0 0 0 0 0 -2 0 0 0Ireland 0 0 0 0 0 0 0 0 0 0 -37 -24 9 12 0Italy 661 458 0 0 0 0 0 0 0 0 -668 1,130 68 243 0Latvia 0 0 0 0 0 0 0 0 0 0 2 0 0 0 0Liechtenstein 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Lithuania 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Luxembourg 0 0 0 0 0 0 0 0 0 0 0 42 0 0 0Malta 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0Netherlands 0 0 0 0 0 0 0 0 0 0 -62 -29 -63 266 0Norway 0 0 0 0 0 0 0 0 0 0 0 0 0 -71 0Poland 0 0 0 0 0 0 0 0 0 0 3 1 2 -37 0Portugal 5 0 0 0 0 0 0 0 0 0 73 184 -117 54 0Romania 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Slovakia 0 0 0 0 0 0 0 0 0 0 87 0 -3 4 0Slovenia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Spain 1 0 0 0 0 0 3 0 0 0 0 -119 -166 -192 0Sweden 0 0 0 0 0 0 0 0 0 0 -1 -39 29 -67 0UK 0 0 0 0 0 0 0 0 0 0 -24 -30 -17 -719 1Total 801 466 0 0 0 0 3 0 0 17 -2,030 -221 -1,200 -5,060 32

Source: EBA

21



Table 14: Direct Sovereign exposure in derivatives

€ mn HSBC RBS Danske Nordea Swedbank SEB SHB BCP BPI BES DBK CBK Erste RBI KBC Piraeus EFGAustria -64 567 0 5 0 0 0 0 0 0 431 13 -17 -7 0 0 0Belgium 71 -72 0 -23 0 0 0 0 0 0 -108 6 0 0 0 0 0Bulgaria 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Cyprus 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Czech 13 84 0 0 0 0 0 0 0 0 150 4 101 0 0 0 0Denmark 3 -237 -224 -48 0 0 6 0 0 0 -42 -3 0 0 0 0 0Estonia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Finland 0 235 -2 60 0 25 18 0 0 0 -602 12 0 0 0 0 0France 8 285 0 0 0 0 0 0 0 0 113 14 0 0 0 0 0Germany 15 -411 97 -39 0 0 0 0 0 0 -184 -28 0 0 0 0 0Greece 82 -75 0 0 0 0 0 0 0 0 -178 0 0 0 0 65 211Hungary 1 4 0 0 0 0 0 0 0 0 248 0 0 1 0 0 0Iceland 0 -1 0 0 0 0 0 0 0 0 8 0 0 0 0 0 0Ireland 1 25 -41 0 0 0 0 0 0 0 0 0 0 0 0 0 0Italy -618 -86 0 0 0 0 0 0 0 0 1,782 0 0 0 0 0 0Latvia 1 0 0 4 0 0 0 0 0 0 161 0 0 0 0 0 0Liechtenstein 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Lithuania 0 0 0 0 0 0 0 0 0 0 -5 0 0 0 0 0 0Luxembourg 0 0 0 0 0 47 0 0 0 0 -1,686 0 -14 0 0 0 0Malta 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Netherlands 12 -1,124 0 0 0 0 0 0 0 0 -77 -27 0 0 0 0 0Norway -1 21 -238 -141 0 29 -10 0 0 0 0 0 0 0 0 0 0Poland 0 0 0 0 0 0 0 0 0 0 19 0 0 0 0 0 0Portugal 259 34 0 0 0 0 0 0 0 0 103 0 0 0 0 0 0Romania 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0Slovakia 0 -2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Slovenia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Spain 69 47 0 0 0 0 0 0 0 0 -75 0 0 0 0 0 0Sweden 13 -88 -448 -19 0 137 -267 0 0 0 -42 0 0 0 0 0 0UK 107 -139 -7 0 0 0 0 0 0 0 49 0 0 0 0 0 0Total 1,076 -954 -841 -201 0 239 -253 0 0 0 365 -2 70 8 0 65 211

Source: EBA

22



Table 15: Total exposure at default

UCG ISP BP UBI SAN BBVA POP SAB BKT PAS SocGen BNP CAGroup

Barclays Lloyds

Greece - 912 - - - - - - - - 6,592 8,499 27,096 209 -Ireland - 1,222 - - - 1,753 - - - - 4,675 7,701 6,796 4,194 -Portugal - 1,574 - - 44,758 9,141 8,124 - - - 1,290 8,149 3,202 12,613 -Italy 382,176 418,126 122,583 133,274 - 592 - - - - 20,891 139,570 83,541 26,277 -Spain - 6,556 - - 355,523 378,707 120,981 87,847 50,239 28,779 13,535 34,362 14,938 43,922 -Total GIIPS 382,176 428,390 122,583 133,274 400,281 390,193 129,105 87,847 50,239 28,779 46,983 198,281 135,573 87,215 -Total Exposure 834,979 586,863 128,140 140,146 1,007,719 545,336 130,654 92,108 50,239 29,267 711,132 1,307,152 1,296,022 856,349 1,044,713GIIPS as % of Total 46% 73% 96% 95% 40% 72% 99% 95% 100% 98% 7% 15% 10% 10% 0%

Source: EBA

Table 16: Total exposure at default

HSBC RBS Danske Nordea Swedbank SEB SHB BCP BPI BES DBK CBK Erste RBI KBC Piraeus EFGGreece 4,268 3,531 - 203 - 62 - 6,330 606 - 3,622 4,561 946 111 559 34,382 53,004Ireland - 64,234 13,327 923 21 420 - 1,453 382 - 18,352 73 304 135 18,232 5 123Portugal - 1,698 - 60 - 66 - 67,962 33,254 55,861 4,237 4,323 251 184 218 - 68Italy - 10,570 - 290 5 178 - 83 1,198 - 40,734 19,177 2,087 1,990 6,083 15 256Spain 9,638 23,295 - 506 3 813 - 937 3,625 6,854 32,284 19,416 901 1,053 2,918 1 192Total GIIPS 13,906 103,328 13,327 1,982 29 1,539 - 76,765 39,065 62,715 99,229 47,550 4,489 3,473 28,010 34,403 53,643Total Exposure 1,444,27

61,121,6

87418,642 454,433 175,355 181,970 225,400 99,125 49,268 83,415

1,098,915

623,652 222,290 164,671 249,855 47,205 79,889

GIIPS as % of Total 1% 9% 3% 0% 0% 1% 0% 77% 79% 75% 9% 8% 2% 2% 11% 73% 67%

Source: EBA

23



BNP Paribas (Overweight Price Target: €65.00)

Valuation Methodology :

Our SOP-based Dec-2011E price target for BNP Paribas is €65. Our SOP multiples are differentiated by business and franchise quality. Note that we have also accounted for an additional €70bn in RWAs in Corporate & Investment Banking resulting from new Basel 2.5 and Basel 3 rules.

Risks to Our View :

Key risks to achieving our price target on the downside and upside include:

- The performance of the capital markets, in particular with respect to demand for equity derivatives, and derivatives trading profits in the environment of increasing correlation and falling dividend expectations impacting the CIB division, as well as structured credit pricing leading to potential asset writedowns both at BNP Paribas and Fortis Bank.

- Asset quality, and the performance of the US operations in BancWest as well as its US commercial real estate book, which in our view requires potentially further writedowns.

- The French retail banking environment, and the net interest margin trends in this market, equity markets performances, macro-economic conditions as well as the impact of the interest rate environment and changes to the shape of the yield curve.

- In terms of M&A, we see some potential Fortis execution risk due to the size of the balance sheet.

HSBC Holdings plc (Overweight Price Target: 900p)


Our target price of 900p for Dec 10 is based on our sum-of-the-parts analysis.

Risks to Our View :

We believe the key risks that could prevent our target price and rating from being achieved, both to the upside and downside, include the following: Being a global universal bank, HSBC is exposed to general macro variables such as a slowdown or rebound in world GDP growth; higher or lower interest rates in all of the economic regions; and changes in FX rates (especially USD). Credit exposure is predominantly to the US consumer (both mortgages and unsecured) in terms of loan losses so any changes in asset quality could impact group earnings. Hong Kong is also a significant part of the group’s earnings growth profile.

IntesaSanpaolo (Overweight Price Target: €3.05)


We assign ISP a Dec 11 TP of €3.05 on a 2012E earnings-based SOP valuation. We assign capital requirements in terms of Core Tier 1 at 7% for retail, 9% for CIB, 8% for public finance and 13% for international operations, and an average group CoE of c.11.1%.

Risks to Our View :

1) Vulnerability to a tougher macroeconomic environment in Italy and (2) sovereign exposure to government bonds

24



Swedbank (Overweight Price Target: Skr128.00)


We use a SOTP valuation methodology to value Swedbank.

Risks to Our View :

The key risks to our rating and PT being achieved include:

Upside risk from faster than expected Baltic, Russia and Ukraine recoveries and writebacks of collective provisionsUpside risk from new commercial aggreement with the savings banksDowside risk from slowdown in Swedish retail activity given Swedbank's proportionaly larger exposure here with 28% market share in Swedish mortgagesDownside risk from smaller than expected benefit in funding costgs from moving for govenrment guaranteed to covered bond funding compared to management guidance of 60bp to 80bp funding cost benefit.

UBS (Overweight Price Target: SF20.00)


Our Dec 2011E sum-of-the-parts-based price target for UBS is SF20, down from SF21 previously. Note that our SoP multiples are differentiated by business and franchise quality, and IB multiple is adjusted for regulatory uncertainty.

Risks to Our View :

Risks that could prevent the stock from achieving our target price and rating include:

· The performance of the capital markets, impacting both the investment banking capital markets business as well as the performance of UBS assets under management.

· Potential risk of further markdowns in remaining legacy credit assets, and potential risk of further balance sheet assets becoming impaired, although greatly reduced post transaction with SNB.

The US, as well as global, economies could experience a slowdown with a corresponding deterioration in credit quality and weaker revenues.

· Growth in new private banking money and the development of private banking transaction margins – in particular UBS's ability to stem recent outflows, and rebuild its franchise.

· Legal risk in part from the structured credit and financial market crisis, could become an issue in particular for banks with material capital markets activities as well as within asset and wealth management

25



Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for BNP Paribas, HSBC Holdings plc, IntesaSanpaolo within the past 12 months.

Analyst Position:The following analysts (and/or their associates or household members) own a long position in the shares of UBS: Kian Abouhossein.

Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of HSBC Holdings plc, IntesaSanpaolo, UBS.

Client:J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Investment Banking (next 3 months): J.P. Morgan expect to receive, or intend to seek, compensation for investment banking services in the next three months from BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Non-Investment Banking Compensation:J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from BNP Paribas, HSBC Holdings plc, IntesaSanpaolo, Swedbank, UBS.

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan’s website https://mm.jpmorgan.com/disclosures.jsp or by calling this U.S. toll-free number (1-800-477-0406).

https://mm.jpmorgan.com/disclosures.jsp

26



Date Rating Share Price (€)

Price Target (€)

18-Dec-06 N 80.81 88.00

07-Mar-07 N 76.16 90.00

08-Mar-07 OW 77.98 90.00

04-Jun-07 N 87.88 93.00

19-Sep-07 N 72.10 89.00

08-Nov-07 N 68.53 90.00

04-Feb-08 N 63.45 83.00

20-Feb-08 N 58.30 77.00

22-Apr-08 N 66.81 74.00

06-Aug-08 N 63.23 71.00

07-Oct-08 N 66.50 72.00

12-Nov-08 N 46.93 60.00

16-Feb-09 N 25.23 28.00

20-Feb-09 N 22.67 27.00

10-Mar-09 N 25.90 29.00

11-May-09 N 44.60 45.00

09-Jun-09 N 46.50 50.00

09-Sep-09 OW 52.63 66.00

09-Nov-09 OW 55.17 65.00

21-Jun-10 OW 50.45 63.00

06-Jul-10 OW 43.45 61.00

03-Aug-10 OW 55.49 65.00

Date Rating Share Price (p)

Price Target (p)

08-Feb-07 UW 799 1100

11-Feb-07 UW 798 850

14-Nov-07 UW 734 820

18-Jan-08 UW 663 790

03-Mar-08 UW 688 720

19-Nov-08 UW 615 675

25-Feb-09 UW 411 400

02-Mar-09 UW 428 360

06-May-09 N 518 450

04-Aug-09 OW 629 760

10-Nov-09 OW 720 900

0

27

54

81

108

135

162

Price(€)

Sep06

Jun07

Mar08

Dec08

Sep09

Jun10

Mar11

BNP Paribas (BNPP.PA) Price Chart

OW €90 N €83 N €60 N €29 OW €66 OW €65

N €90 N €90 N €74 N €72 N €27 N €50 OW €61

N €88 N €93 N €89 N €77 N €71 N €28N €45 OW €65 OW €63

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 18, 2006.

0

211

422

633

844

1,055

1,266

1,477

Price(p)

Sep06

Jun07

Mar08

Dec08

Sep09

Jun10

Mar11

HSBC Holdings plc (HSBA.L) Price Chart

UW 720p UW 360p OW 900p

UW 850p UW 790p UW 400pOW 760p

UW 1,100p UW 820p UW 675p N 450p


Initiated coverage Feb 08, 2007.

27



Date Rating Share Price (€)

Price Target (€)

04-Dec-06 OW 5.29 6.30

17-Apr-07 OW 5.97 6.65

20-Jun-07 OW 5.67 6.79

12-Sep-07 OW 5.28 6.78

08-Oct-07 OW 5.58 6.55

23-Jan-08 OW 4.60 6.33

09-Apr-08 N 4.76 5.75

04-Jun-08 N 4.13 5.54

20-Aug-08 N 3.55 4.90

21-Oct-08 N 3.11 4.77

27-Nov-08 OW 2.43 3.11

17-Feb-09 OW 2.10 3.00

07-May-09 OW 2.48 3.05

27-May-09 OW 2.60 3.05

10-Nov-09 OW 2.90 3.80

04-Dec-09 OW 3.08 3.80

01-Mar-10 OW 2.58 3.80

22-Mar-10 OW 2.80 3.80

10-Jun-10 OW 2.12 3.00

15-Dec-10 OW 2.15 3.00

19-Apr-11 OW 2.07 3.05

Date Rating Share Price (Skr)

Price Target (Skr)

25-Jan-07 N 222.51 300.00

30-Jan-07 OW 219.20 300.00

24-Oct-07 OW 165.02 284.00

28-Oct-07 OW 157.99 259.00

18-Feb-08 OW 139.38 238.00

24-Apr-08 OW 139.79 225.00

16-Oct-08 N 57.69 112.00

31-Oct-08 N 51.49 77.00

16-Mar-09 N 19.77 29.00

07-May-09 N 44.87 54.00

28-Jul-09 N 44.05 60.00

18-Aug-09 N 54.18 59.00

15-Sep-09 N 65.97 75.00

30-Oct-09 OW 60.50 76.00

22-Feb-10 OW 66.30 80.00

10-May-10 OW 66.00 84.00

27-Jul-10 OW 79.00 85.00

04-Oct-10 OW 91.50 110.00

11-Nov-10 OW 92.90 115.00

15-Feb-11 OW 105.80 125.00

04-May-11 OW 115.20 128.00

0

1

2

3

4

5

6

7

8

9

10

Price(€)

Sep06

Jun07

Mar08

Dec08

Sep09

Jun10

Mar11

IntesaSanpaolo (ISP.MI) Price Chart

OW €6.783 N €5.539 OW €3.11 OW €3.05 OW €3.804

OW €6.793 N €5.749 N €4.773 OW €3.049 OW €3.803OW €2.999

OW €6.3OW €6.65OW €6.551OW €6.328 N €4.905 OW €2.997 OW €3.802OW €3.797 OW €3OW €3.05


Initiated coverage Dec 04, 2006.

0

70

140

210

280

350

420

Price(Skr)

Sep06

Jun07

Mar08

Dec08

Sep09

Jun10

Mar11

Swedbank (SWEDa.ST) Price Chart

N Skr60OW Skr76 OW Skr85 OW Skr125

OW Skr300 OW Skr259OW Skr225 N Skr77 N Skr54N Skr75 OW Skr84OW Skr115

N Skr300 OW Skr284OW Skr238 N Skr112N Skr29 N Skr59 OW Skr80 OW Skr110 OW Skr128


Initiated coverage Jan 25, 2007.

28



Date Rating Share Price (SwF)

Price Target (SwF)

31-Oct-06 UW 69.59 72.00

18-Dec-06 UW 66.08 75.00

04-Jun-07 UW 71.15 77.00

05-Sep-07 UW 56.43 74.00

01-Oct-07 UW 55.67 72.00

02-Oct-07 N 59.05 72.00

06-Nov-07 N 49.00 70.00

07-Nov-07 OW 49.00 70.00

29-Nov-07 OW 49.09 67.00

10-Dec-07 OW 51.58 64.00

04-Feb-08 OW 39.36 61.00

21-Feb-08 OW 32.34 56.00

05-Mar-08 OW 28.67 55.00

02-Apr-08 OW 30.24 45.00

22-Apr-08 OW 31.66 43.00

17-Jun-08 OW 25.80 33.00

17-Oct-08 OW 19.09 28.00

14-Jan-09 OW 15.00 20.00

11-Feb-09 OW 13.63 18.00

18-Mar-09 OW 11.71 16.00

09-Jun-09 OW 14.88 17.00

09-Sep-09 N 18.94 20.00

03-Feb-10 OW 14.65 20.00

10-Feb-10 OW 13.67 19.00

15-Apr-10 OW 18.45 23.00

06-Jul-10 OW 14.04 22.00

07-Jun-11 OW 15.88 21.00

24-Jun-11 OW 14.49 20.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N= Neutral, UW = Underweight

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] The analyst or analyst's team's coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

Coverage Universe: Abouhossein, Kian: BBVA (BBVA.MC), Banco Popular (POP.MC), Barclays (BARC.L), Credit Suisse Group (CSGN.VX), Deutsche Bank (DBKGn.DE), Deutsche Postbank (DPBGn.DE), Goldman Sachs (GS), Lloyds Banking Group (LLOY.L), Mediobanca (MDBI.MI), Morgan Stanley (MS), Natixis (CNAT.PA), Royal Bank of Scotland (RBS.L), Santander (SAN.MC), UBS (UBSN.VX)

0

23

46

69

92

115

Price(SwF)

Sep06

Jun07

Mar08

Dec08

Sep09

Jun10

Mar11

UBS (UBSN.VX) Price Chart

UW SwF72OW SwF70OW SwF61OW SwF45 OW SwF18 N SwF20 OW SwF23

UW SwF75 UW SwF74N SwF70OW SwF64OW SwF55OW SwF33 OW SwF20OW SwF17 OW SwF19 OW SwF20

UW SwF72 UW SwF77N SwF72OW SwF67OW SwF56OW SwF43OW SwF28OW SwF16 OW SwF20OW SwF22 OW SwF21


Initiated coverage Oct 31, 2006.

29



J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2011

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 47% 42% 11%IB clients* 50% 46% 32%

JPMS Equity Research Coverage 45% 47% 8%IB clients* 70% 64% 52%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on the front of this note or your J.P. Morgan representative.

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA,SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 025/01/2011 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

http://www.optionsclearing.com/publications/risks/riskstoc.pdf

http://www.morganmarkets.com/

30



Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules.

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised June 13, 2011.

Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

euro banks

Documents