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: Banks
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 Italy: Economic Recovery and NPL Progress Improving Confidence
We recently traveled to Milan and met with representatives from Italy’s three largest banks. These banks have combined assets of ~€1,800 bln, loans of ~€960 bln, and market caps of ~€85 bln. We also recently traveled to the U.K. and had the opportunity to meet with the 4th and 5th largest Italian banks while there. Despite a challenging 2016 in terms of market returns, the stock…
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: At Home with the Challengers of U.K. Banking
During a recent trip to London, we had the opportunity to sit down with executives from six UK-based banks, including teams from two High Street banks and four from what are commonly referred to as “Challenger banks”. In this note, we review our stance on U.K. banks, provide a brief breakdown of the market, and discuss our key takeaways from the trip.
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…
CIBC: On PVTB, Why We Agree with the Higher Bid (and Two Reasons Why it Should Not be Raised Further)
In this ETF Comment, we: (a) explain why we agree with CIBC’s decision to increase its bid for PVTB, and (b) provide two reasons why the bank should walk away from their bid, if this new price is not accepted.
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.