In banking, as in most businesses, geography matters. Population growth supports GDP growth, which in turn drives revenue growth. In general, U.S. bank investors divide the U.S. into six distinct regions: the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest, and West (see chart at the end of this comment). Within these regions, there are 53 metropolitan statistical areas (MSAs) with a population greater than 1 million and nearly…
Insights: United States
U.S. Bank Mergers in Two Charts
In the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (TSX: HFMU.U) and the Hamilton Capital Global Bank ETF (TSX: HBG) our exposure to the U.S. mid-cap banking sector is ~65% and ~48%, respectively (owing to the sector’s low dividend yields, Hamilton Capital Global Financials Yield ETF has just 10% exposure to U.S. banks).
Notes from the Field: “Follow the Sun” / Catching up with U.S. Banks in Phoenix
One of our themes for the U.S. banks is to “follow the sun”, which refers to our emphasis on banks domiciled in the higher population growth states/metropolitan statistical area[1] (“MSAs”). Every single one of the 15 faster growing large MSAs (i.e., those with populations in excess of 1.5 million people) are located in the (sunny) Southeast, Southwest, and West.
Notes from the Field: Everything’s Peachy in Atlanta
A recent trip to Atlanta gave us a chance to meet with executives from several publicly traded banks headquartered in Georgia, as well as some of their commercial customers and a local land broker. Seven months after the election of an administration with ambitions of pro-growth policies and reforms that renewed investor interest in U.S. bank stocks, the trip presented a good opportunity to check in…
Notes from the Field: U.S. Mid-Cap Bank Meetings in New York
We recently attended a U.S. financial services conference in New York City and had the opportunity to meet with executives from seven mid-cap banks. These meetings were of particular importance to us, as the Hamilton Capital Global Bank ETF (HBG) has ~46% of NAV invested in the U.S., with the majority of that in banks with less than US$50 bln in assets. Given the relatively low…
JPM Investor Day: Capital Return, Tax Reform, and Interest Rates
As we have written in the past, in the Hamilton Capital Global Bank ETF (HBG), we generally prefer mid-cap U.S. banks over their larger peers. With respect to the Hamilton Capital Global Financials Yield ETF (HFY), our U.S. bank allocation is very small (~6%), because yields for the sector are among the lowest in global banking (although we expect them to rise in the next two…
U.S. Banks: Another Tough Quarter for Mega-Caps as All Four Experience Negative Q/Q EPS Growth (and Four-Year Near-Zero Growth Trend Persists)
On February 7th, 2017, we will be launching the Hamilton Capital Global Financials Yield ETF (HFY). It is the aspiration of HFY to generate “REIT-like yields, with positive rate sensitivity”. Therefore, we anticipate that HFY would have close to zero exposure to the four mega-cap banks primarily while their yields are very low. There are nearly 400 global financials with yields in excess of 5%, and…
Another U.S. Mid-Cap Bank Holding to be Acquired
Last night, it was announced that another Hamilton Capital Global Bank ETF (HGB) holding was being acquired, the second in 8 months. Along with greater EPS growth, lower regulatory risk, and higher interest rate sensitivity, this highlights one of the other reasons / themes why we prefer the U.S. mid-cap banks to their mega-cap peers: the potential for consolidation.
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.
WFC: A Canadian Bank Counterfactual as it Enters Year #4 of No Growth
We generally have minimal exposure to the global mega-cap banks primarily because of their very low EPS growth, higher regulatory risk, and relative to their mid-cap peers, materially lower interest rate sensitivity. In this Insight, we explain why we believe “slow growth” WFC basically represents a Canadian bank counterfactual.
OCC Letter Shows WFC is Not Out of the Regulatory Woods Yet
As we have written in prior Insights, Wells Fargo (“WFC”) – like its other mega-cap peers – continues to struggle to generate earnings growth. The mega-caps also struggle with regulatory risk; before the recent U.S. election, we cautioned that the risk that regulators were shifting their focus from the capital markets banks to the largest regionals appeared to be rising. WFC was a prime example, coping…
U.S. Banks: C, JPM, BAC, and WFC Continue Multi-Year Trend of Close to Zero EPS Growth
As we have indicated in prior commentary, we have zero exposure to the U.S. mega-cap banks, primarily because of their very low EPS growth, mid-single digit ROEs (in the case of C and BAC), and very high regulatory risk (see “Five Reasons We Don’t Own C, JPM and BAC”, June 14th). We favour a portfolio of U.S. banks derived from the nearly 200 publicly traded U.S.…