In the almost two years since our last trip to Atlanta, a lot has changed in the banking sector (M&A) and a lot has not (strong growth). The opportunity to speak with 8 banks operating in and around Atlanta – several of which are holdings in the Hamilton Capital Global Bank ETF (HBG) and the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (HFMU.U) – provided some…
Commentary: HFG
U.S. Banks: Mid-Caps vs. JPM, BAC, C & WFC – Higher EPS Growth at Deeper Valuation Discounts
At present, the actively-managed Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (ticker, HFMU.U), represents superior value versus a portfolio of the largest U.S. banks, namely Bank of America, JPMorgan, Citigroup, and Wells Fargo. As the chart below highlights, the portfolio-weighted price-to-earnings (P/E) ratio for HFMU.U is now at a 2.5x discount to its 5 year average, which is meaningfully larger than the 0.9x discount of the four…
Notes from New York: Cards, Payments and Financial Technology Meetings
We met the management teams of over a dozen payments, cards, exchanges and other related companies in the rapidly growing financial technology sector[1] in New York. The financial technology sector (“Fin-Tech”) is expected to continue to benefit from multiple structural tailwinds including the growth of e-commerce and growing technology adoption. However, high competitive intensity, rapidly evolving consumer preferences and a wide variety of business models (including…
HBG Posts Robust 21% EPS Growth Y/Y in Q4-18
In Q4 2018, the holdings in the Hamilton Capital Global Bank ETF (ticker: HBG) recorded year-over-year portfolio-weighted EPS growth of a robust 21%[1], supported by excellent fundamentals of U.S. mid-cap banks (~45% weight) and a globally diversified portfolio of international banks (~55% weight). The growth was strong and consistent across virtually all regions. In fact, 33 banks in HBG reported year-over-year EPS higher greater than 10%.…
Canadian Banks: Five Takeaways from BBT/STI, Accelerating U.S. Bank M&A
Last week, in our insight “U.S. Bank M&A: Implications of the Largest Deal in a Decade”, we explained why we expect U.S. bank consolidation will accelerate following the BB&T/SunTrust merger, and reasons why such activity will predominately be within the small and mid-cap banks. In this insight, we offer five takeaways for the Canadian banks – BMO, CM, RY, and TD – and their U.S. expansion…
Indian Banks Overview: Large Diverse Sector, Operating in a High Growth Market
In this insight, we provide a review of the Indian economy and banking system, highlighting the most important issues facing the sector. India is a large emerging market with a fast-growing banking sector comprised of over 35 publicly traded banks divided into two main categories: state-owned (over 20) and private banks (over 15). For many years, India has been – and is forecast to remain –…
U.S. Bank M&A: Implications from the Largest Deal in a Decade
On Thursday morning, BB&T (BBT) and SunTrust (STI), two of the largest banks in the U.S. Southeast, announced a merger of equals (“MOE”). With an aggregate deal value approaching US$66 billion, the transaction marks the largest bank M&A deal since the 2008 financial crisis and will create the 6th largest bank in the United States. In this update we provide our thoughts including the main takeaways…
Notes from India: Financials Poised to Benefit from World’s Fastest Growing Economy
We met the management teams of over a dozen Indian banks, insurers and asset managers in the financial capital of Mumbai, India in December. With real GDP growth of over 7% over the past decade, India is one of the largest emerging markets and forecast to be the fastest growing major economy in 2019. Not surprisingly, the management teams we met were very upbeat. Exposure to…
Australian Financials: Regulatory Clarity Arrives
The Hamilton Capital Australian Financials Yield ETF (HFA) was launched in December 2018, with a targeted yield of 6.5% or higher paid monthly (aided by covered calls). The Australian financials have a history of long-term outperformance versus the Canadian financials with lower volatility. In fact, the Australian banks outperformed the Canadian banks during the global financial crisis. One main reason Australian financials have consistently outperformed their…
Australian Banks Outperformed the Canadian Banks During the Global Financial Crisis
It is well known that the Canadian banks performed very well during the financial crisis relative to their global peers, and the U.S. banks in particular. However, what is less well known is that the Australian banks did even better than the Canadian banks, generating higher returns from 2007 through 2009, the years encompassing the financial crisis (see chart below). As we explain in “Dividend-Heavy Australian…
Dividend-Heavy Australian Financials: History of Outperformance vs. Canadian Peers
All Canadian bank investors know that the sector has experienced very good performance over the past ten to fifteen years. However, most are less familiar with Australia, which actually has a history of long-term outperformance relative to the Canadian financials, with virtually identical volatility. Interestingly, as a testament to the strength of the Australian financial sector, its banks even outperformed the Canadian banks during the global…
HFY: Despite Global Sell-off, 5% Yield Helping HFY Hold in vs. Even the Lowest Beta Countries
In periods of high macro uncertainty/market volatility, certain countries’ financials tend to hold up better – i.e., decline less in corrections. Most prominent among these low beta countries are Canada, Australia and virtually all Northern European countries (HFY has ~20% exposure). These countries are all wealthy and importantly their financial sectors have healthy dividend yields. 2018 has been a very challenging year, with many global financial…