Insights: United States

U.S. Banks: Mid-Caps vs. JPM, BAC, C & WFC – Higher EPS Growth at Deeper Valuation Discounts

At present, the actively-managed Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (ticker, HFMU.U), represents superior value versus a portfolio of the largest U.S. banks, namely Bank of America, JPMorgan, Citigroup, and Wells Fargo. As the chart below highlights, the portfolio-weighted price-to-earnings (P/E) ratio for HFMU.U is now at a 2.5x discount to its 5 year average, which is meaningfully larger than the 0.9x discount of the four…

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…

U.S. Bank M&A: Implications from the Largest Deal in a Decade

On Thursday morning, BB&T (BBT) and SunTrust (STI), two of the largest banks in the U.S. Southeast, announced a merger of equals (“MOE”). With an aggregate deal value approaching US$66 billion, the transaction marks the largest bank M&A deal since the 2008 financial crisis and will create the 6th largest bank in the United States. In this update we provide our thoughts including the main takeaways…

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…

U.S. Financials | Mid-Caps Longer-Term Outperformance in One Chart

Given the media attention given to the U. S. large-cap financials (e.g., JPM, MetLife, AIG), Canadian investors can’t be faulted for sometimes neglecting to diversify into the very large and varied mid-cap financial sector south of the border. That said, in our view, investors should not overlook this important sub-sector given its long-term history of material outperformance relative to its better known large-cap peers, as evidenced…

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…

Notes from Chicago: 3 Takeaways from the Windy City (part 2)

We recently met the top management of four U.S. mid-cap banks headquartered in Chicago (see related October 10, 2018 “Notes from Chicago – What the Banks Said About the Canadian Banks/M&A (Part 1)”). Chicago is the third largest U.S. MSAwith real GDP of US$583 billion and a population of 9.6 million. Although large, the Chicago MSA has one of the least favourable demographic profiles among the “large…

Notes from Texas: Lone Star Shines Bright

On a recent investor roadshow to Texas, we had the opportunity to meet the top management of ten Texas headquartered U.S. banks. The Texas economy is booming (annualized real GDP grew +5.2% yoy in Q4/17 making it the fastest growing economy of all 50 U.S. states) driven by a robust recovery in the energy sector and strong labor market trends in an increasingly diversified economy. With…

U.S. Banks: 3 Deals in 3 Weeks. Will M&A Accelerate Post-Dodd-Frank?

Hamilton Capital ETFs continue to benefit from material outperformance and substantial AUM growth. In this note, we discuss U.S. bank M&A and ask the question: will successful passage of the Dodd-Frank rollback bill result in an acceleration of sector consolidation? Last week, on May 24th, the President signed a bipartisan bill rolling back key provisions of the Dodd-Frank Act (named “Economic Growth, Regulatory Relief and Consumer Protection Act”).

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…

U.S. Banks: Mega-Caps’ Q4 Results in 4 Charts

With reporting season now over, we thought we would offer some key takeaways for the four U.S. mega-cap banks (JPM, C, BAC, WFC). Given that these four firms account for over 33% of the U.S. financials index (S5FINL Index), they have a significant/disproportionate impact on the overall sector’s results and are therefore worth following. In this note, we show operating earnings trends for each bank. As…

U.S. Banks: Wells Fargo and “Invisible” Bank Taxes

We have written several times on WFC’s inability to grow EPS and its ongoing regulatory problems. That said, even we were surprised that on Janet Yellen’s last day as Chair of the Federal Reserve (“Fed”), the central bank filed a consent order against Wells Fargo (“WFC”) requiring the bank take a number of extraordinary steps to improve corporate governance. While WFC does so, the Fed has…

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