Commentary: HFY

European Banks in Charts: Credit Normalization vs. Margins

The European banking sector includes some of the world’s largest banks, making its health and profitability very important to the global markets. Given the sustained weakness in the sector (the STOXX Europe 600 Banks has fallen ~30% since the beginning of 2018), we thought it would be helpful to review key balance sheet and income statement trends – in 14 charts – since the European sovereign…

Global Exchanges, E-Brokers and Fin-Tech: Secular and Structural Growth Drivers Abound

We had the opportunity to meet the management of over a dozen global exchanges, e-brokers and fin-tech firms at a recent conference in New York. Global exchanges and e-brokers have benefitted from multiple secular, regulatory and cyclical tailwinds in recent years, which have resulted in strong growth trajectory and robust stock returns. The Hamilton Capital Global Financials Yield ETF (HFY) [1] has ~4% exposure to exchanges and e-brokers,…

Notes from New York: Cards, Payments and Financial Technology Meetings

We met the management teams of over a dozen payments, cards, exchanges and other related companies in the rapidly growing financial technology sector[1] in New York. The financial technology sector (“Fin-Tech”) is expected to continue to benefit from multiple structural tailwinds including the growth of e-commerce and growing technology adoption. However, high competitive intensity, rapidly evolving consumer preferences and a wide variety of business models (including…

Canadian Banks: Five Takeaways from BBT/STI, Accelerating U.S. Bank M&A

Last week, in our insight “U.S. Bank M&A: Implications of the Largest Deal in a Decade”, we explained why we expect U.S. bank consolidation will accelerate following the BB&T/SunTrust merger, and reasons why such activity will predominately be within the small and mid-cap banks. In this insight, we offer five takeaways for the Canadian banks – BMO, CM, RY, and TD – and their U.S. expansion…

Indian Banks Overview: Large Diverse Sector, Operating in a High Growth Market

In this insight, we provide a review of the Indian economy and banking system, highlighting the most important issues facing the sector. India is a large emerging market with a fast-growing banking sector comprised of over 35 publicly traded banks divided into two main categories: state-owned (over 20) and private banks (over 15). For many years, India has been – and is forecast to remain –…

Notes from India: Financials Poised to Benefit from World’s Fastest Growing Economy

We met the management teams of over a dozen Indian banks, insurers and asset managers in the financial capital of Mumbai, India in December. With real GDP growth of over 7% over the past decade, India is one of the largest emerging markets and forecast to be the fastest growing major economy in 2019. Not surprisingly, the management teams we met were very upbeat. Exposure to…

Australian Financials: Regulatory Clarity Arrives

The Hamilton Capital Australian Financials Yield ETF (HFA) was launched in December 2018, with a targeted yield of 6.5% or higher paid monthly (aided by covered calls). The Australian financials have a history of long-term outperformance versus the Canadian financials with lower volatility. In fact, the Australian banks outperformed the Canadian banks during the global financial crisis. One main reason Australian financials have consistently outperformed their…

Australian Banks Outperformed the Canadian Banks During the Global Financial Crisis

It is well known that the Canadian banks performed very well during the financial crisis relative to their global peers, and the U.S. banks in particular. However, what is less well known is that the Australian banks did even better than the Canadian banks, generating higher returns from 2007 through 2009, the years encompassing the financial crisis (see chart below). As we explain in “Dividend-Heavy Australian…

Dividend-Heavy Australian Financials: History of Outperformance vs. Canadian Peers

All Canadian bank investors know that the sector has experienced very good performance over the past ten to fifteen years. However, most are less familiar with Australia, which actually has a history of long-term outperformance relative to the Canadian financials, with virtually identical volatility. Interestingly, as a testament to the strength of the Australian financial sector, its banks even outperformed the Canadian banks during the global…

HFY: Despite Global Sell-off, 5% Yield Helping HFY Hold in vs. Even the Lowest Beta Countries

In periods of high macro uncertainty/market volatility, certain countries’ financials tend to hold up better – i.e., decline less in corrections. Most prominent among these low beta countries are Canada, Australia and virtually all Northern European countries (HFY has ~20% exposure). These countries are all wealthy and importantly their financial sectors have healthy dividend yields. 2018 has been a very challenging year, with many global financial…

U.S. Financials | Analysts vs. the Markets (as Fundamentals/Stock Prices Diverge)

This has been a tough month for the financials, particularly banks. What made this correction unusual is that throughout October, the financials continued to post very high earnings growth, and with minimal downgrades in estimates/target prices, the ingredients for a sharp sell-off were largely absent. Of the 270 financial services stocks covered by the U.S. broker-dealer, Sandler O’Neill + Partners (SOP), over 70% met or beat…

Notes from Chicago: Opinions on the Canadian Banks (part 1)

We recently met with the top management of four Chicago-headquartered U.S. mid-cap banks (see related October 9, 2018 “Notes from Chicago – Three Takeaways from the Windy City (Part 2)”). Given their large presence in this giant MSA, it was not surprising that the Canadian banks and their speculated U.S. expansion plans were a frequent discussion topic. Chicago is the single most important market to Canadian…

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