As previously disclosed, the Hamilton Capital Global Bank ETF (HBG) entered the Brexit referendum vote on June 23rd with ~12% cash and materially underweight U.K. banks (see our July 6th HBG Manager Comment). This provided an opportunity to strategically deploy cash/add positions after the “Leave” side declared victory and global bank stocks declined sharply. In the two trading days following the Brexit vote, the global banks…
Insights: Europe
One Chart on Stress Test Highlights the Diversity of European Banks
The Hamilton Capital Global Bank ETF (HBG; TSX) is expected, over time, to hold ~25% exposure to European banks. Prominent among the ETF’s identified objectives is to generate yield and to limit volatility. As a result, in the European portfolio, HBG places a significant emphasis on Northern European countries which are – on balance – wealthier than Canada/U.S. and have higher forecast GDP growth, and whose…
One Trillion Reasons Why Europe is Not Japan
Recently, we have seen many comparisons between Europe now to Japan after it emerged from its deep and protracted cycle (from 1989 to 1999). In this note, we address why this analogy, and by extension the comparison between their respective banking systems, lacks merit.
HBG: Post-Brexit Portfolio Changes
The Hamilton Capital Global Bank ETF (HBG) held almost 12% cash leading up to the Brexit vote on June 23rd, which provided an opportunity to strategically add positions after the “Leave” side declared victory and equity markets and bank stocks declined sharply. From Thursday June 23rd to Monday June 27th, the global banks experienced a sharp correction, falling 11%. The European banks took the brunt of…
European Banks: Negative Rates – Four Charts Showing They are Not as Menacing as Advertised
In our Insight “European Banks: Sector Profitability Almost “Normal”, Reaching ~€90 bln in 2015”, we highlighted that the sector has seen ‘core’ earnings recover to ~€90 bln, which represents a near complete recovery in earnings to pre-cycle (2007) levels. However, at the same time, European bank index levels are closer to levels last seen at the peak of the sovereign debt crisis (2011/2012).
European Banks: Sector Profitability Almost “Normal”, Reaching ~€90 bln in 2015
Macro issues continue to dominate European bank valuations as the sector remains in focus, particularly following the recent Brexit vote. Given all of the concerns over European banks, it is worth noting that profitability for the sector has almost completely recovered to pre-cycle levels. In 2007 (the last “normal” year), the European banks made just over €100 bln in “core” earnings. At the same time, the…
Spanish Election Results: No Governing Coalition (Yet), and No Gains for Anti-Austerity/Euro Skeptic Parties
Spaniards returned to the polls on Sunday, June 26 for the country’s second national election in six months. This came just three days after the UK surprised markets by voting to leave the EU.
Thoughts on Brexit and its Impact on the European Banks
It is safe to say, looking at today’s market movements, that the result of the U.K.’s E.U. referendum – a 51.9% victory for the LEAVE camp – has taken many investors by surprise. In this Insight, we share some preliminary thoughts on the implications of Brexit, particularly as it relates to the European banks.
Thoughts on Brexit (Entering Referendum with 12% Cash; Underweight U.K.)
In the Hamilton Capital Global Bank ETF (HBG; TSX), we went underweight U.K. banks heading toward the Brexit referendum, with just 3% of exposure; over time, we would expect this to be closer to 5-7% (see our HBG Manager Comment, “U.K. Banks: Remaining Underweight for Brexit as CDS Spreads/Polls Diverge”, June 8th). Here are some preliminary thoughts on implications of Brexit, particularly as related to HBG. First, the…
U.K. Banks: Remaining Underweight for Brexit as CDS Spreads/Polls Diverge
Given the United Kingdom’s superior long-term growth profile and favourable demographics, we would expect the Hamilton Capital Global Bank ETF (HBG; TSX) to – over time – have an allocation to U.K. banks of between 5 and 7%, including the ‘challenger’ banks. That said, since the fund was launched, the portfolio weighting to U.K. banks has been closer to 3% as we seek to reduce the…
Part #1 of 2: Why the Global Investment Banking Model is Under Siege
If you follow or own JPM, C, BAC, MS, GS, or European ADRs CS, UBS, DB, you have no doubt observed the relentless stream of negative headlines/announcements underscoring the very challenging operating environment of the global investment banks. In our view these challenges are structural, not cyclical, and we believe that global investment banking model is effectively under siege. In this Insight, we discuss the immense…
Notes from NYC: For Global Investment Banks, Legacy Issues and Volatile Markets Creating Challenges
Along with a group of other investors, we recently attended meetings in New York City with executives from global banks (7 banks, including 6 international). Many of the conversations were focused on the investment banking businesses of these firms and how they are dealing with structural changes to the business model and regulatory environment, which are contributing to the ongoing headlines highlighting the challenges facing the…