Insights: Europe

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…

European Bank Reported Earnings Up ~54% in 2015 (after Rising ~55% in 2014)

Although obscured by the very difficult market sentiment, reported earnings[1] for the largest publicly traded European banks, representing total assets of over €25 trillion, rose by ~54% in 2015, almost exactly the same as the 55% increase the sector experienced in 2014. ‘Core’ earnings[2] – i.e., excluding unusual items – rose a very consequential ~20% in 2015, after rising ~43% in 2014 (see chart below).

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,…

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.

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.

Stay Informed!

We are Canada's leading specialists in the financials sector.
Subscribe to get notified of our latest insights, updates and upcoming events.