On a recent trip through Madrid, Spain we had the opportunity to speak to most of the publicly traded Spanish banks, as well as the Bank of Spain. The Hamilton Capital Global Bank ETF (HBG) which is outperforming its benchmark by 14.4%, has ~3% exposure to Spanish banks, while the Hamilton Capital Global Financials Yield ETF (HFY), which is outperforming its benchmark by over 6%, has…
Insights: Europe
Notes from Italy: Economic Recovery and NPL Progress Improving Confidence
We recently traveled to Milan and met with representatives from Italy’s three largest banks. These banks have combined assets of ~€1,800 bln, loans of ~€960 bln, and market caps of ~€85 bln. We also recently traveled to the U.K. and had the opportunity to meet with the 4th and 5th largest Italian banks while there. Despite a challenging 2016 in terms of market returns, the stock…
Notes from the Field: At Home with the Challengers of U.K. Banking
During a recent trip to London, we had the opportunity to sit down with executives from six UK-based banks, including teams from two High Street banks and four from what are commonly referred to as “Challenger banks”. In this note, we review our stance on U.K. banks, provide a brief breakdown of the market, and discuss our key takeaways from the trip.
Wells Fargo/Deutsche Bank: Some Thoughts on Regulatory/Litigation Risk
Recent events impacting Deutsche Bank (DBK.GY) and Wells Fargo (WFC) underscore – yet again – that the mega-cap banks, particularly those with (1) global investment banks and/or (2) operating in the U.S., continue to face significant regulatory/litigation risk, irrespective of quality. In general, these two categories of banks, which overlap, are not growing very fast (in some instances shrinking), have mid-single digit ROEs, and/or continue to…
On HBG, Post-Brexit Rebound Portfolio Changes: Increasing Cash by Reducing South America; U.S.
As previously disclosed, the Hamilton Capital Global Bank ETF (HBG) entered the Brexit referendum vote on June 23rd with ~12% cash and materially underweight U.K. banks (see our July 6th HBG Manager Comment). This provided an opportunity to strategically deploy cash/add positions after the “Leave” side declared victory and global bank stocks declined sharply. In the two trading days following the Brexit vote, the global banks…
One Chart on Stress Test Highlights the Diversity of European Banks
The Hamilton Capital Global Bank ETF (HBG; TSX) is expected, over time, to hold ~25% exposure to European banks. Prominent among the ETF’s identified objectives is to generate yield and to limit volatility. As a result, in the European portfolio, HBG places a significant emphasis on Northern European countries which are – on balance – wealthier than Canada/U.S. and have higher forecast GDP growth, and whose…
One Trillion Reasons Why Europe is Not Japan
Recently, we have seen many comparisons between Europe now to Japan after it emerged from its deep and protracted cycle (from 1989 to 1999). In this note, we address why this analogy, and by extension the comparison between their respective banking systems, lacks merit.
HBG: Post-Brexit Portfolio Changes
The Hamilton Capital Global Bank ETF (HBG) held almost 12% cash leading up to the Brexit vote on June 23rd, which provided an opportunity to strategically add positions after the “Leave” side declared victory and equity markets and bank stocks declined sharply. From Thursday June 23rd to Monday June 27th, the global banks experienced a sharp correction, falling 11%. The European banks took the brunt of…
European Banks: Negative Rates – Four Charts Showing They are Not as Menacing as Advertised
In our Insight “European Banks: Sector Profitability Almost “Normal”, Reaching ~€90 bln in 2015”, we highlighted that the sector has seen ‘core’ earnings recover to ~€90 bln, which represents a near complete recovery in earnings to pre-cycle (2007) levels. However, at the same time, European bank index levels are closer to levels last seen at the peak of the sovereign debt crisis (2011/2012).
European Banks: Sector Profitability Almost “Normal”, Reaching ~€90 bln in 2015
Macro issues continue to dominate European bank valuations as the sector remains in focus, particularly following the recent Brexit vote. Given all of the concerns over European banks, it is worth noting that profitability for the sector has almost completely recovered to pre-cycle levels. In 2007 (the last “normal” year), the European banks made just over €100 bln in “core” earnings. At the same time, the…
Spanish Election Results: No Governing Coalition (Yet), and No Gains for Anti-Austerity/Euro Skeptic Parties
Spaniards returned to the polls on Sunday, June 26 for the country’s second national election in six months. This came just three days after the UK surprised markets by voting to leave the EU.
Thoughts on Brexit and its Impact on the European Banks
It is safe to say, looking at today’s market movements, that the result of the U.K.’s E.U. referendum – a 51.9% victory for the LEAVE camp – has taken many investors by surprise. In this Insight, we share some preliminary thoughts on the implications of Brexit, particularly as it relates to the European banks.