Our Hamilton Global Financials ETF (HFG) was the top performing ETF in its category in 2022 and outperformed its domestic competitors and the iShares Global Financials ETF (IXG) over the last two years. During that period, HFG generated a total return of 17.5%, beating every competitor ETF by at least 2.8%[1]. Importantly, not only did HFG outperform its competitor global financials ETFs and the index in…
Commentary: HFG
Canadian Banks: Should Investors be (More) Worried? (fQ3 in Charts)
As the market has priced in a higher risk of a recession, Canadian bank stocks have declined ~20% in just 5 months, including a ~10% decline since the sector started reporting Q3 results in late August. The market is worried that central banks will cause a recession as they aggressively raise interest rates to tame inflation. Further complicating their job is that central banks are simultaneously…
Canadian Banks: TD Buys FHN – A Very Strong Fit
After much speculation in recent years about its appetite for additional U.S. bank M&A, TD offered ~US$13.4 bln in cash to buy First Horizon Corporation (FHN)[1], a Tennessee-based regional bank, in late February, almost 15 years since its last “large” U.S. bank acquisition – Commerce Bancorp. In our view, the acquisition offers many strategic benefits given FHN: (i) is an optimal size, adding material scale with…
Canadian Banks: 2022 starts with M&A; Recovery Continues (fQ1 in Charts)
2022 is off to a noteworthy start for the Canadian banks, with long-awaited M&A announcements and another strong earnings season. In December, we posted our outlook for the year, “Canadian Banks: Five Possible Drivers in 2022”, in which we stated that the cyclical recovery was not yet over. We identified five factors that we expected would influence bank share prices during 2022: (i) reserve releases, (ii)…
Canadian Banks: BMO’s High Risk, High(er) Reward Acquisition of BoW
Bank of Montreal recently announced the acquisition of BNP Paribas’ U.S. retail banking subsidiary, Bank of the West (BoW) for ~C$20 bln – the largest acquisition in Canadian banking history. The transaction is very different from prior acquisitions made by the Canadian banks and is further complicated by the fact that BoW is not publicly traded (wholly owned by BNP), so most Canadian investors have limited…
Canadian Banks: Five Possible Drivers in 2022 (Q4 2021 in Charts)
HCAL Ends Year #1 as the Top Performing Canadian Bank ETF; Hamilton ETF AUM Exceeds $1 bln Before we discuss our outlook for 2022, we wanted to highlight that the Hamilton Enhanced Canadian Bank ETF (HCAL), the top performing bank ETF since its launch in October 2020. Year-to-date (2021), HCAL is outperforming equal weight/yield weighted strategies by 9% and covered call strategies by 14-17%. As of November…
Australian Banks: Robust Earnings and Large Capital Return
A strong recovery of the Australian economy is underway as evidenced by the solid earnings growth seen at the Australian banks in their most recent reporting season. In this insight, we discuss the positive trends impacting the sector. Specifically, we elaborate on the recent operating results (both earnings drivers and capital returns), and other positive trends including economic growth supported by further reopening as well as…
Canadian Banks: How High Can Dividends Go? (and HCAL Outperforms)
Canadian bank dividends, in our view, are poised to rise – a lot. In August, before Q3 earnings season, we argued there was no policy rationale for the continuing moratorium on dividend increases (see “Canadian Banks: Why OSFI Should Lift its Dividend Cap Now”). At the time, earnings and capital were already at all time highs. Moreover, the banks had set aside an enormous ~$21.4 bln…
Canadian Banks: Record Earnings/Capital; Still in Catalyst #2 (Q3 2021 in Charts)
Q3 earnings trends for the Canadian banks were again strong with record earnings and capital levels, while the ‘three catalyst’ investment thesis – normalization of profits, reserve releases and higher margins – we laid out for the sector in February continues to play out almost exactly as predicted[1]. We believe the banks are still supported by Catalyst #2. Before we discuss Canadian bank results in more…
Canadian Banks: Why OSFI Should Lift its Dividend Cap Now
Before we discuss why the Canadian regulator OSFI should lift its cap on dividends as soon as possible, we would like to highlight the recent launch of the Hamilton Enhanced Multi-Sector Covered Call ETF (ticker: HDIV), an equal weight portfolio of seven established covered call ETFs with a sector mix broadly consistent with that of the S&P/TSX 60. HDIV utilizes modest 25% cash leverage to support…
Canadian Banks: Catalyst #2 (Reserve Releases) Approaching
In this Insight, we explain why we believe reserve releases of between $6 and $8 bln for the Canadian banks are coming in 2021, which could have a material impact on share prices. While all credit cycles are unique, they each have distinct stages and this COVID credit cycle has been no different. The first stage was three quarters in duration (Q2-20 to Q4-20) and characterized…
U.S. Banks: M&A Features Prominently on Q1 Calls
[All values in U.S. dollars unless otherwise noted] As we noted in last week’s Insight, U.S. Financials: Why They Remain Attractive (Especially the Mid-Caps), the Q4 2020 pick-up in U.S. bank M&A – a clear sign of management’s conviction that the economic recovery was well underway – has gained momentum in 2021, including several transactions involving Hamilton U.S. Mid/Small-Cap Financials ETF (tickers: HUM, HUM-U) and Hamilton…