In banking, as in most businesses, geography matters. Population growth supports GDP growth, which in turn drives revenue growth. In general, U.S. bank investors divide the U.S. into six distinct regions: the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest, and West (see chart at the end of this comment). Within these regions, there are 53 metropolitan statistical areas (MSAs) with a population greater than 1 million and nearly…
Insights & Commentary
HFY: Modestly Raising European Bank Exposure
With improving GDP growth and monetary policy backdrop in Europe and lower bank valuations, we have increased the exposure to high quality European banks in the Hamilton Capital Global Financials Yield ETF (HFY). Specifically, we (i) increased European bank exposure by ~700 bps, (ii) reduced “other financials” in the U.S. by ~200 bps, and (iii) reduced European insurance by ~400 bps. As a result of these…
HFY: Reducing REITs/Australia
Per our comment published today, “HFY and HBG Manager Comment: Reducing Australian Bank Exposure on Rising Regulatory Risk”, we have recently reduced HFY’s Australian exposure following the government’s launch of a Royal Commission into the Australian financial services sector. This change was part of a wider review of the portfolio which also saw HFY’s REIT exposure reduced by over half to ~7%. At the same time,…
HBG & HFY: Reducing Australian Banks
With last week’s announcement of the Royal Commission on the Australian financial sector, which will likely have an emphasis on the largest banks, we have opted to reduce our weighting to Australia. Specifically, in the Hamilton Capital Global Bank ETF (HBG), we recently reduced the Australian banks to under 5% (from ~9%), replacing them with U.S. banks. In the Hamilton Capital Global Financials Yield ETF (HFY),…
U.S. Bank Mergers in Two Charts
In the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (TSX: HFMU.U) and the Hamilton Capital Global Bank ETF (TSX: HBG) our exposure to the U.S. mid-cap banking sector is ~65% and ~48%, respectively (owing to the sector’s low dividend yields, Hamilton Capital Global Financials Yield ETF has just 10% exposure to U.S. banks).
Notes from the Field: “Follow the Sun” / Catching up with U.S. Banks in Phoenix
One of our themes for the U.S. banks is to “follow the sun”, which refers to our emphasis on banks domiciled in the higher population growth states/metropolitan statistical area[1] (“MSAs”). Every single one of the 15 faster growing large MSAs (i.e., those with populations in excess of 1.5 million people) are located in the (sunny) Southeast, Southwest, and West.
HFMU.U Posts 12% EPS Growth, 11% Ahead of U.S. Financials
November 20, 2017 by Hamilton Capital The holdings within the Hamilton Capital U.S. Mid-Cap Financials ETF (HFMU.U) reported a very strong Q3, posting portfolio-weighted earnings growth of ~12% Y/Y. This compares to just 1% Y/Y for the U.S. financials[1]. The two most important factors contributing to HFMU.U’s much higher growth were: (i) its substantial overweight position in U.S. mid-cap banks (which are largely unrepresented in the Index, but…
HFY: Thoughts on Financials ETFs
Supported by improving global growth and a more positive monetary policy backdrop, sentiment for the global financials has improved over the last year. In our view, the sector is “under-earning” in a low rate environment, largely in the form of lower margins. With monetary policy slowly beginning to normalize, the potential for margin expansion to support higher EPS growth, and therefore stock prices is becoming increasing…
HBG’s U.S. Bank Portfolio Posts 16% EPS Growth Y/Y
November 16, 2017 by Hamilton Capital In the Hamilton Capital Global Bank ETF (Ticker: HBG), the U.S. bank portfolio reported another very strong quarter, posting portfolio-weighted earnings growth of ~16% Y/Y, its fifth consecutive quarter of double-digit Y/Y growth. HBG is up 10.3% YTD (through October 31st), making it 13% ahead of the KBW Global Bank Index (CAD). HBG continues to generate very consistent performance, with comparatively…
HBG: U.S. Bank Portfolio Posts EPS Growth 20% Y/Y
September 5, 2017 In the Hamilton Capital Global Bank ETF (HBG, HBG.U; TSX), the U.S. mid-cap bank portfolio reported another very strong quarter, posting portfolio weighted year-over-year earnings growth of ~20% – its fifth consecutive quarter of double-digit growth. As we have noted in the past, with over 150 mid-cap banks (i.e., those with market caps between $0.5 bln and $20 bln), there is greater opportunity…
Notes from Italy: Economic Recovery and NPL Progress Improving Confidence
We recently traveled to Milan and met with representatives from Italy’s three largest banks. These banks have combined assets of ~€1,800 bln, loans of ~€960 bln, and market caps of ~€85 bln. We also recently traveled to the U.K. and had the opportunity to meet with the 4th and 5th largest Italian banks while there. Despite a challenging 2016 in terms of market returns, the stock…
Notes from the Field: Everything’s Peachy in Atlanta
A recent trip to Atlanta gave us a chance to meet with executives from several publicly traded banks headquartered in Georgia, as well as some of their commercial customers and a local land broker. Seven months after the election of an administration with ambitions of pro-growth policies and reforms that renewed investor interest in U.S. bank stocks, the trip presented a good opportunity to check in…