During a recent trip to London, we had the opportunity to sit down with executives from six UK-based banks, including teams from two High Street banks and four from what are commonly referred to as “Challenger banks”. In this note, we review our stance on U.K. banks, provide a brief breakdown of the market, and discuss our key takeaways from the trip.
Insights & Commentary
Notes from the Field: U.S. Mid-Cap Bank Meetings in New York
We recently attended a U.S. financial services conference in New York City and had the opportunity to meet with executives from seven mid-cap banks. These meetings were of particular importance to us, as the Hamilton Capital Global Bank ETF (HBG) has ~46% of NAV invested in the U.S., with the majority of that in banks with less than US$50 bln in assets. Given the relatively low…
HBG: Raising U.S. & Australian Bank Exposure Post-Pullback
Supported by active management, the Hamilton Capital Global Bank ETF (HBG) continues to enjoy material outperformance. The since-inception returns have exceeded the global banks index by ~11%[1], despite comparatively lower drawdowns relative to major indices. In the past month we made two noteworthy adjustments to the ETF’s country weightings. On February 14th we posted an HBG Comment disclosing that we had recently reduced our weighting to…
HBG: EPS for U.S. Bank Portfolio Grows 15%+ in Q1
U.S. banks are by far the largest portfolio within the Hamilton Capital Global Bank ETF (HBG) and over time, we expect this group will represent between 30% and 50% of the ETF. As we have written previously, we typically prefer U.S. mid-cap banks over their larger peers because they: (i) are generally more rate-sensitive, (ii) are merging, and (iii) are growing earnings faster. In fact, during…
CIBC: On PVTB, Why We Agree with the Higher Bid (and Two Reasons Why it Should Not be Raised Further)
In this ETF Comment, we: (a) explain why we agree with CIBC’s decision to increase its bid for PVTB, and (b) provide two reasons why the bank should walk away from their bid, if this new price is not accepted.
JPM Investor Day: Capital Return, Tax Reform, and Interest Rates
As we have written in the past, in the Hamilton Capital Global Bank ETF (HBG), we generally prefer mid-cap U.S. banks over their larger peers. With respect to the Hamilton Capital Global Financials Yield ETF (HFY), our U.S. bank allocation is very small (~6%), because yields for the sector are among the lowest in global banking (although we expect them to rise in the next two…
HBG: EPS for HBG’s U.S. Bank Holdings
The Hamilton Capital Global Bank ETF (HBG) currently has exposure to 27 U.S. banks, spread across 21 different states, representing 42% of the ETF. As we have written previously, we favour a portfolio drawn from the universe of over 200 U.S. mid-cap banks over their larger peers because they: (i) are more rate-sensitive, (ii) are growing earnings faster, and (iii) are merging. This quarter underscored –…
HBG: Raising U.K. Exposure
In the Hamilton Capital Global Bank ETF (HBG), we expect U.K. banks, including the so-called “challenger banks” over time, to represent between 5-10% of the ETF. However, in HBG’s first year, the prospect of Brexit resulted in much lower weights (generally between zero and 5%). In addition, we also consistently hedged our pound currency exposures. However, our positioning on the U.K. (and the U.S.) has recently…
HBG Celebrates One Year Anniversary, 12% Ahead of Global Banks
January 25, 2017 The Hamilton Capital Global Bank ETF (HBG) recently finished its first full year, increasing in value by ~28% (including dividends). Importantly, the ETF outperformed its benchmark, the KBW Global Bank Index (CAD) by almost 12%[1]. Not only did HBG generate significant outperformance relative to the global banks, it also managed to accomplish this while experiencing comparatively lower drawdowns. Currency hedging for HBG is…
U.S. Banks: Another Tough Quarter for Mega-Caps as All Four Experience Negative Q/Q EPS Growth (and Four-Year Near-Zero Growth Trend Persists)
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…
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.
HFY: Global Financials Sector Offers ~400 Firms Yielding > 5%
The Hamilton Capital Global Financials Yield ETF (HFY) is scheduled to launch on February 7th, 2017. The objective of the fund is to offer attractive returns from regular/quarterly distribution income and capital appreciation by investing in global financials. Put differently, the aspiration of the fund is for the ETF to generate “REIT-like yields, with positive rate sensitivity”. HFY is a global ETF which means its investable…