In early February we attended the KBW Winter Financial Services Symposium in Florida, which was attended by other investors and representatives from U.S. banks and capital markets firms. Of the +70 primarily U.S. mid-cap banks in attendance, only five had assets over $50 bln. There was a clear division in sentiment between company executives, who are not seeing major issues with their operations, and investors, who…
Insights: United States
Notes from the Field: BofAML Insurance Conference 2016
We recently attended Bank of America Merrill Lynch’s 2016 Insurance Conference in New York, where we took in presentations by 27 insurance companies, with representatives from the life, property and casualty (P&C), reinsurance and mortgage insurance sub-sectors. Most of the companies presenting were U.S.-based (and listed), with several Bermuda and Europe-domiciled reinsurers, and a Canadian P&C insurer also in attendance. Notwithstanding the location of their headquarters,…
Notes from Texas Bank Tour: Is This Time Different from Previous Downturns?
Last week we traveled to Texas with a group of investors to meet with management teams from 15 different banks (14 are publicly traded). With the exception of six banks, all are headquartered in Texas, and all but one has notable energy exposure in their loan portfolios (Oklahoma, Mississippi, Arkansas, and Louisiana banks also participated). The stocks of most of these banks have dropped over the…
Déjà vu? European Banks Now vs. U.S. Banks in 2011 (and what followed)
Déjà vu? In this 3 slide presentation, we highlight how European banks continue to mirror the recovery of U.S. banks at the same stage of the credit cycle in 2011, up to and including the most recent macro-driven correction. Click here to view the presentation
Global Growth – Economists vs. the Markets
In this comment, we discuss the seemingly large gap between economists’ growth expectations for the global economy and those of the market. The former is forecasting comfortably positive growth, while the latter’s worries have prompted a global sell-off in equities. We also address the most likely trigger of a global downturn, while reviewing the impact of the European sovereign debt crisis.
Another U.S. Mid-Cap Bank Deal as HBAN Buys FMER
The trend in U.S. mid-cap bank M&A continues, with Huntington Bancshares Incorporated (HBAN) announcing an agreement to acquire FirstMerit Corporation (FMER) for US$3.4 bln. HBAN is paying 1.6x tangible book value in a stock and cash transaction (75%/25%), implying a 31% premium for FMER shareholders as of yesterday’s close. The deal follows a very steep correction in the U.S. banks year-to-date (e.g., BKX down ~18%, KRX…
BofA Merrill Lynch Financials Conference in NYC: Notes from the Field
We recently attended the Bank of America Merrill Lynch Banking & Financial Services Conference in New York City. Representatives from major banks, asset managers, and consumer finance companies participated in very informative Q&A sessions, providing us and other investors with their thoughts on interest rates, M&A, and the credit environment. We would identify the following key takeaways:
U.S. Banks: Revisiting “100 Bank Mergers”, 3 Years Later
In December 2012, we published a note, entitled “100 Bank Mergers”. In the original note, we predicted that, in the following 3 years, there would be approximately 100 bank deals in the U.S. mid-cap banking sector (i.e., representing ~25% of the approximately 450 publicly-traded U.S. banks). To support this prediction, we detailed five potential catalysts in 2012: 1) Deals beget deals … and deal activity had…
U.S. Banks: Notes from Boston Banc Analysts Conference
On November 5th and 6th, we attended the 2015 Banc Analysts Association of Boston conference (BAAB), at which many of the biggest banks in the United States presented. The theme of the conference was growth, with a focus on technological change, although presenters used the venue to cover a variety of issues, which are outlined below.
U.S. Banks: Two Significant Deals in Two Days Met with Market Skepticism
On Thursday, the second significant bank acquisition was announced in two days, with NYCB acquiring AF, followed by KEY acquiring FNFG. As we have written in the past, with over 350 publicly-traded banks (5,600 in total), we expect the 30+ year secular trend of U.S. bank consolidation to continue for many years (see our December 13th, 2012 note “100 Bank Mergers”, where we discuss consolidation in the…
Business Development Corps: Notes from NYC Field Trip
We recently travelled to New York City to meet with executives from a group of business development companies (“BDCs”), a diverse category of “other financials” focused on yields. There are over 30 publicly traded BDCs in our investable universe, with market capitalizations ranging from ~$100 mln to several billion dollars. Yields for these financials are generally over 8%.
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…