Canada

HCB: A New Strategy for Bank Investors (Wealth Professional Article)

Wealth Professional interviewed Rob Wessel, Managing Partner at Hamilton Capital, following the launch of the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB). The interview covers mean reversion trends and how they are incorporated into HCB, how the strategy might lower risk in period of market turbulence. Click here to read more.

Globe & Mail on HCB: Unique Canadian Bank ETF

The Globe & Mail was quick to cover our latest ETF, the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), launched on October 1, 2018. The article explains how a mean-reversion strategy can offer long-term performance and reduced risk, referencing 3rd party backtesting of an almost identical strategy. HCB offers Canadian investors a smart mean-reversion approach to owning Canada’s “Big Six” banks, in a convenient, low-fee ETF.…

Canadian Banks: Mean-Reversion Strategy for Higher Returns/Lower Risk

On October 2nd, 2018, Hamilton Capital will be launching the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB). This ETF will consist of the Big-6 Canadian banks, rebalanced monthly to capitalize on the long-term mean reversion tendencies of the sector. Specifically, it will overweight the three most oversold banks from the prior month (to ~80%) and underweight the three most overbought banks (to ~20%). Please note: The…

Canadian Western Bank as a U.S. Mid-Cap Proxy

Canadian Western Bank has achieved highly material long-term outperformance versus its larger peers. In this post, we relate its sizeable outperformance to our preference for U.S. mid-cap banks. In our January 24, 2018 comment, “U.S. Banks: High/Low Growth Areas in One Map (i.e., ‘Follow the Sun’)”, we explained that there are vast demographic differences within the six distinct geographic regions of the United States (five of…

Canadian Banks: Why U.S. Mid-Caps are Easier to Acquire (than 10 Years Ago)

In the Hamilton Capital Global Bank ETF (HBG; TSX), we generally seek to hold 50% North American banks, with an emphasis on the ~200 publicly traded U.S. mid-cap banks (those firms with <$100 bln in assets). As of the time of writing, HBG had exposure to 23 U.S. banks representing 43% of the ETF’s net asset value.

Canadian Banks: Revisiting our “End of an Era” Thesis (Five Years Later)

In May 2011, we wrote an essay entitled “The Canadian Banks – The End of an Era”. In this essay – which was excerpted in the Globe and Mail – we explained why the Canadian banks were entering a period in which their two-decade period of double digit EPS/dividend growth was ending. Specifically, we identified three reasons supporting this thesis: (i) the drivers of the sector’s…

Canadian Banks: Housing Correction Concerns Increasing Regulatory Risk

As we have highlighted in numerous Hamilton Capital Insights, regulatory risk is a key risk in global banking, and one we attempt to minimize our exposure. It is most intense for the mega-banks in the U.S. and Europe, particularly those with global investment banking operations (i.e., C, BAC, JPM, CSGN.VX, UBS.VX, DBK.GY, BARC.LN). Although post-crisis, those global banks have been the epicentre of regulatory risk, the recent…

Canadian Banks: More Risky vs. Less Risky Loans in One Chart

At present, the Canadian banks have outstanding asset quality. Although provisions rose notably for the second consecutive quarter in Q2, provision and gross impaired loan ratios remain below long-term averages. With Q3 reporting beginning August 23rd, we believe the market will be focused on two areas of potential deterioration: (i) energy loans (which have been driving higher loan losses), and (ii) Alberta consumer, particularly uninsured.

On Capital, Canadian Banks Continue to Lose Ground vs. Global Peers

In our Insight, “Canadian Banks – Are Falling Global Reserve/Capital Rankings Increasing Regulatory Risk?” (April 27th, 2016), we highlighted that on the most important capital ratio, CET1, the Canadian banks have an average ratio of ~10%, which is well below the average of ~13.5% for the banks in 35 “major” countries (ranking 34th out of 35). We also explained in that Insight that we believe the…

Part #3 of 3: Canadian Banks – Are Falling Global Reserve/Capital Rankings Increasing Regulatory Risk?

In our three-part series, Canadian Banks: How Worried Should You Be (about Rising Energy Losses, Low Reserves, and Recessionary Alberta)?, we have been reviewing the challenges facing the sector. In this Insight, we discuss another potential issue facing the Canadian banks: rising regulatory risk. With the sector near the bottom of global rankings for key capital and reserve ratios, we discuss the potential for policy makers to…

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