Today, the ECB announced greater than expected easing measures, which the market interpreted as constructive for the eurozone economy and its banking sector (note, eurozone represents ~60% of total Europe GDP). Key components of the announcement include:
Insights & Commentary
JPMorgan Chase: Higher Energy Reserves from Bellwether for U.S. Banking Sector
JPMorgan Chase (JPM) held its 2016 Investor Day on Tuesday and released some notable commentary on its energy portfolio, the capital markets business, and its outlook for the U.S. economy. The stock ended the day down 4.2%, underperforming the KBW Bank Index (BKX), which declined by 2.9%. JPM is down ~16% from its December high, compared to the BKX, which declined ~21%. There were a few significant…
Notes from Florida: KBW Financial Services Symposium
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…
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…
European Banks: “Now” vs. Peak Sovereign Debt Crisis (in Charts)
The global financials, particularly the banks, have had a very difficult two months, correcting significantly off of their early-December highs. The macro-driven correction has been indiscriminate, with the U.S. large-cap banks (BKX), U.S. mid-cap banks (KRX), U.S. financials (S5FINL), global financials (SGFS), and European banks (SX7P) falling 20%, 20%, 15%, 16%, and 25%, respectively, from their December highs.
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
Chinese Banks Part #3: Are Chinese Banks Solvent? Q&A on the Sector
In this series on Chinese banks, we have been evaluating the risk that distress in the system triggers a global sell-off. In the first two parts, we assumed that the Chinese government’s reported statistics are unreliable and hence obscuring the true financial distress of the sector. Then, to help investors understand these systemic risk issues, we presented the arguments supporting the bear case (Part #1), as…
Chinese Banks Part #2: For BULLS, Four Reasons Why Macro Risk from Chinese Banks is Overstated
In this three part series, we discuss macro risk posed to the markets by the enormous Chinese banking sector. In Part #2, we take the perspective of the ‘bulls’, providing reasons why the macro risk posed by the Chinese banking sector is overstated. In Part #1, we provided the perspective of the ‘bears’, discussing why the sector could be the epicentre of a further global sell-off…
Chinese Banks Part #1: For BEARS, Four Reasons Why Chinese Banks’ Distress Could Amplify the Global Sell-Off
In this three part series, we discuss macro risk posed to the markets by the enormous Chinese banking sector. In Part #1, we take the perspective of the ‘bears’, discussing why the sector could be the epicentre of a further global sell-off and/or additional macro uncertainty. In Part #2, we take the perspective of the ‘bulls’, providing reasons why many believe the macro risk posed by…
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.
Italy: A Deeply Discounted, Fragmented Sector Undergoing Cyclical Recovery and Regulatory Reform
In this note, we provide a review of the Italian banking system, including an overview and a discussion of the most important issues facing the sector. Italian banks represent a deeply discounted, fragmented system undergoing a cyclical recovery while at the same time, undergoing regulatory reform, and potential M&A.