Today, we hosted “A Conversation on the Future of Canadian Financial Services” at the Royal York Hotel in Toronto. We presented and held a fireside chat with three current and former Canadian financial services CEOs to discuss the most important fundamental and macro themes facing the financials and markets.
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Syriza Forms Government in Greece
On Sunday, the far left party, Syriza, won the Greek election, and with a smaller (far right) anti-austerity party, has a coalition to form a government. While this could change over the next few days and weeks, the immediate market reaction has been surprisingly muted (given the press coverage). The Greek banks have all fallen sharply and Greek 10 year yields are up over 50 bps.
ECB Announces Quantitative Easing
As everyone knows, the ECB… finally (!)… announced open ended quantitative easing, the details of which are as follows: (a) amount of €60 bln a month until at least September 2016 (or ~€1.0 trillion) according to the capital key, which means purchases are roughly apportioned by GDP of each country. This amount includes existing ABS and covered bonds.
In Person: Hamilton Capital’s Annual Outlook Presentation
Today, we hosted our annual outlook presentation at One King West in Toronto, where we discussed the most important fundamental and macro themes facing the financials and markets.
Why CIBC Needs a Visible Capital Allocation Strategy
Since the end of the credit crisis (i.e., 2009), CIBC has generated core cash EPS growth above its Canadian banking peers as well as a (much) higher ROE. Despite exceeding its peers over the past four years on these important growth/profitability metrics, CIBC continues to trade at a notable P/E discount. So, in light of this post-crisis performance, and a (perceived) below-average risk profile, why does…
Why the Canadian Financials Will Likely Underperform their Global Peers
We are often asked for our thoughts on the Canadian financials relative to the global financials. Regular readers of our work will know that we favour financial services companies outside of Canada. There are many reasons, but the most compelling is that the Canadian financials have fully recovered (both in terms of valuation and earnings) from the most recent cycle, while the U.S. and global financials…
Will National Bank (Continue to) Be Re-Rated?
When trying to forecast the best performing Canadian bank, investors need to consider which bank stock has the potential to be re-rated higher by the market – i.e., which could benefit from relative multiple expansion. Looking at historical returns for the Canadian banks over virtually any period shows that the top performing bank stock often benefited from being re-rated. Click to Download»
Three Emerging Themes in Global Financials
A number of important themes are emerging in the financial services sector, which in North America alone includes over 1,000 companies, and over $4.5 trillion of market capitalization. Macro risks remain, but we believe that over the next 24 months, several themes offer excellent investing opportunities. Here is a description of just three…
Why We’re Not Short (or Long) the Canadian Banks
There has been a lot of discussion in recent months about the potential for a material decline in Canadian home prices and the possible fallout for Canadian financials, and the banks, in particular. The speculated financial services sector impact – should such a decline occur – has ranged from: (i) slower economic growth causing slower revenue/earnings growth (most likely), to (ii) a credit downturn (a possibility),…
Are MICs the “Canary in the Coal Mine”?
Over the past several months, there has been a lot of discussion about the potential for Canadian home prices to fall and the possible impact on the Canadian financials (and banks, in particular). After a near-vertical rise in over the past decade (see chart), Canadian home prices appear vulnerable to a decline. The speculated impact of a decline on the domestic financial services sector has ranged…
Moody’s Bizarre View of Royal Bank
This past January, the once-powerful rating agency, Moody’s, downgraded the long-term credit ratings of four of the “Big five” Canadian banks. The downgrades, which were attributed to the economic risks posed by the high level of consumer debt and hot housing market in Canada, were largely ignored by the debt and equity markets. Click to Download»
For MICs, Time to Exercise Caution?
We were recently asked to look at and give our opinion on mortgage investment corporations, or MICs. Given the ultra-low interest rate environment, high yielding MICs have become a popular product among retail investors. What we found behind these high yield products was concerning to us, particularly given the potential for a generalist investor to significantly underestimate the actual credit risk of certain MICs.