May 07, 2013
Thomson Reuters Inaugural Data-Driven TRust Index Shows Trust Rebounding in Global Financial Institutions
NEW YORK, – Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the launch of a new proprietary index designed to measure trust in global financial institutions. The Thomson Reuters TRust Index (TRust Index) is a comprehensive fact-based and data-driven series of quarterly proprietary benchmarks built on Thomson Reuters data, news, and analytics capabilities.
“Whilst much has been said on the topic of trust in the financial sector since 2008, rebuilding the global financial system requires a clear understanding of the measures and values of key constituencies and the events impacting the confidence with which the industry is regarded,” said David Craig, president, Financial & Risk, Thomson Reuters. “No one is better positioned to offer objective, fact-based benchmarks. Through our own trusted data, news and analytics, we have built the TRust Index to provide ongoing measures of trust to enable insight and foster constructive dialogue.”
Thomson Reuters TRust Index supports Thomson Reuters vision to connect and enable the global financial community. The TRust Index is based on data for the top 50 global financial institutions – the largest banks, investment banks and investment managers based on market cap – as a proxy for the sector as a whole for the period through the first-quarter 2013. It provides a number of metrics derived from Thomson Reuters proprietary news and social media sentiment analysis, analyst expectations, credit spreads and governance data. It will be published on a quarterly basis.
TRust Index key findings for the first-quarter 2013 include:
- Sentiment: Thomson Reuters news and social media sentiment analysis shows that after several years of decline since 2008, the first quarter of 2013 shows a rebound in trust sentiment for the top 50 global financials with an overall improvement in the economy, markets and bank profitability. Other contributors to improved sentiment may include regulation, and regional strengths, for example Asian institutions are strengthening due to interest rate easing and liquidity infusion.
- Confidence of the marketplace: The analyst community’s first-quarter estimates for financials led all other sectors, which seemed to be validated by strong first-quarter reporting for many financial institutions. The confidence the analyst community has in the sector’s prospects extends to the 5-year outlook, and while there might be intermediate weaker quarters or periods, the long-term view continues to outpace every other sector. In addition, analysts assess the financials differently based on regional and macroeconomic variables, with recent estimates higher for Asian institutions than for their U.S. and European counterparts.
- Interestingly, this first TRust Index analysis reveals the market itself is lagging the improved analyst view, discounting the sector relative to its prospects. The investor view (market price) contains an implied view on future earnings growth (or market-implied growth) and globally that implied number is forecasting negative earnings growth. This means investors (the market price) and analysts (the forecasts) views diverge at present.
- Counterparties: Thomson Reuters Datastream shows tightening credit spreads over the past year, signaling greater confidence in financials as reliable counterparties. They also reflect the external environment – our TRust analysis shows spreads widest for European firms in the index, likely reflecting relative evaluation of firms located in or highly exposed to the euro.
- Controversy/Governance: Thomson Reuters ASSET4 data shows that in a period of many controversies across the sector, the Top 50 Global Financials experienced a high incidence of 'trust events'. And that the erosion of trust, regulatory pressure and increased awareness of the costs - reputational and monetary - appear to be driving increasingly widespread adoption of policies intended to reduce controversy risk. We believe that tracking this data in the quarters ahead will enable insight into their effectiveness and metrics on progress.
“Overall, the inaugural TRust Index metrics reveal a number of encouraging indications that trust and confidence in financial institutions are rebounding – as evidenced in positive media sentiment, strong analyst assessment and first-quarter performance in an improving market economy, and tighter credit spreads as a measure of counterparty confidence,” says Scott McCleskey. “But continued wariness by investors in the sector, and potential future vulnerabilities in the controversy and governance arena suggest that we are early in the chapter on rebuilding trust in the global financial community.
"Thomson Reuters TRust Index provides a broader lens across institutional constituents of the global financial marketplace to invite dialogue on where trust comes from, how is it measured, what is its value, and how is that value earned or lost?” added McCleskey. “Trust is a core topic today and we built the TRust Index to provide a comprehensive and objective level of insight, and we will continue to expand and extend the metrics and analyses. Whether you work in the financial industry, analyze, invest in or write about it, are a customer of the banks and investment firms that comprise it, or even a citizen of any of the economies that depend upon its health and stability, this is relevant. Trust affects us all.”
Please click here for further details on the Thomson Reuters first-quarter 2013 TRust Index.
Thomson Reuters TRust Index Methodology and Sources:
Thomson Reuters ASSET4
Thomson Reuters Business Classification (TRBC)
Thomson Reuters Datastream
Thomson Reuters I/B/E/S
Thomson Reuters MarketPsych Indices
Thomson Reuters News Analytics (TRNA) for Internet News and Social Media
Thomson Reuters StarMine Quantitative Models
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