On February 7th, 2017, we will be launching the Hamilton Capital Global Financials Yield ETF (HFY). It is the aspiration of HFY to generate “REIT-like yields, with positive rate sensitivity”. Therefore, we anticipate that HFY would have close to zero exposure to the four mega-cap banks primarily while their yields are very low. There are nearly 400 global financials with yields in excess of 5%, and…
Insights: Region
Another U.S. Mid-Cap Bank Holding to be Acquired
Last night, it was announced that another Hamilton Capital Global Bank ETF (HGB) holding was being acquired, the second in 8 months. Along with greater EPS growth, lower regulatory risk, and higher interest rate sensitivity, this highlights one of the other reasons / themes why we prefer the U.S. mid-cap banks to their mega-cap peers: the potential for consolidation.
Canadian Banks: Why U.S. Mid-Caps are Easier to Acquire (than 10 Years Ago)
In the Hamilton Capital Global Bank ETF (HBG; TSX), we generally seek to hold 50% North American banks, with an emphasis on the ~200 publicly traded U.S. mid-cap banks (those firms with <$100 bln in assets). As of the time of writing, HBG had exposure to 23 U.S. banks representing 43% of the ETF’s net asset value.
WFC: A Canadian Bank Counterfactual as it Enters Year #4 of No Growth
We generally have minimal exposure to the global mega-cap banks primarily because of their very low EPS growth, higher regulatory risk, and relative to their mid-cap peers, materially lower interest rate sensitivity. In this Insight, we explain why we believe “slow growth” WFC basically represents a Canadian bank counterfactual.
OCC Letter Shows WFC is Not Out of the Regulatory Woods Yet
As we have written in prior Insights, Wells Fargo (“WFC”) – like its other mega-cap peers – continues to struggle to generate earnings growth. The mega-caps also struggle with regulatory risk; before the recent U.S. election, we cautioned that the risk that regulators were shifting their focus from the capital markets banks to the largest regionals appeared to be rising. WFC was a prime example, coping…
U.S. Banks: C, JPM, BAC, and WFC Continue Multi-Year Trend of Close to Zero EPS Growth
As we have indicated in prior commentary, we have zero exposure to the U.S. mega-cap banks, primarily because of their very low EPS growth, mid-single digit ROEs (in the case of C and BAC), and very high regulatory risk (see “Five Reasons We Don’t Own C, JPM and BAC”, June 14th). We favour a portfolio of U.S. banks derived from the nearly 200 publicly traded U.S.…
Canadian Banks: Revisiting our “End of an Era” Thesis (Five Years Later)
In May 2011, we wrote an essay entitled “The Canadian Banks – The End of an Era”. In this essay – which was excerpted in the Globe and Mail – we explained why the Canadian banks were entering a period in which their two-decade period of double digit EPS/dividend growth was ending. Specifically, we identified three reasons supporting this thesis: (i) the drivers of the sector’s…
In Person: Canadian Banks – A Conversation on International Expansion
Today, we hosted a fireside chat with three of the Big-6 Canadian bank CEOs at Toronto’s Fairmont Royal York Hotel. The conversation centered around the banks’ international platforms, discussing everything from their differing capital deployment strategies to their outlooks for their foreign platforms over the next decade.
Canadian Banks: Housing Correction Concerns Increasing Regulatory Risk
As we have highlighted in numerous Hamilton Capital Insights, regulatory risk is a key risk in global banking, and one we attempt to minimize our exposure. It is most intense for the mega-banks in the U.S. and Europe, particularly those with global investment banking operations (i.e., C, BAC, JPM, CSGN.VX, UBS.VX, DBK.GY, BARC.LN). Although post-crisis, those global banks have been the epicentre of regulatory risk, the recent…
Is Wells Fargo Un-investable (for Now)?
As we have written in the past, we strongly favour U.S. mid-cap banks – i.e., those with assets under $100 bln. These 200+ banks are growing (much) faster than their large-cap peers, are generally more rate sensitive, and are merging. And crucially, they have less regulatory risk. Up until recently, the epicentre of regulatory risk among the mega-caps has been banks with global investment banking operations…
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…
Notes from Florida Bank Tour: Commercial Real Estate Lending and M&A under the Microscope
We recently traveled to Florida to meet with a group of mid-cap banks. Of the 12 banks that participated on the trip, 9 are headquartered in Florida (2 Arkansas, 1 from New Jersey), and 10 are publicly-traded[1]. Of the publicly-traded banks, the median asset size is US$5.0 billion, the median market cap is US$841 million (US$1.5 billion average), and the median expected loan growth in 2016…