A Large and Varied Universe\u00a0 <\/strong><\/p>\n Most investors are familiar with the U.K.\u2019s mega banks (e.g., HSBC, BARC, LLOY), often referred to as the \u201cHigh Street\u201d banks. Perhaps lesser known to Canadian investors are the so-called \u201cChallenger\u201d banks, now numbering in the double digits. The \u201cChallenger\u201d banner is an all-encompassing name used to denote the much smaller banking competitors looking to challenge the large established banks in one or more market segments. Arguably, their size relative to the High Street banks is the only facet these companies have in common (although they themselves even vary significantly in size). As one executive described it, the U.K. banking sector is effectively made of four different types of players:<\/p>\n Below are the key takeaways from our meetings:<\/p>\n Notes<\/strong><\/p>\n [1]<\/a> Under the current Basel regulatory framework, there are two approaches to the calculation of a bank\u2019s capital requirements: (1) the Standard approach (which employs the regulator\u2019s set of risk weights by loan exposure type), and the Internal Ratings-based (\u201cIRB\u201d) approach (which allows the company to use its own internally-developed \u2013 and lower \u2013 risk weights). To be allowed to use the IRB approach, a bank must meet a slate of requirements, and be approved to its national regulator (for the U.K. banks, that is Prudential Regulatory Authority). 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 \u201cChallenger banks\u201d.\u00a0 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.<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_custom_body_class":"","_custom_post_class":"","content-type":""},"categories":[5,6,39,14],"tags":[],"_links":{"self":[{"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/posts\/8452"}],"collection":[{"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/comments?post=8452"}],"version-history":[{"count":1,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/posts\/8452\/revisions"}],"predecessor-version":[{"id":17862,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/posts\/8452\/revisions\/17862"}],"wp:attachment":[{"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/media?parent=8452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/categories?post=8452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hamiltonetfs.com\/wp-json\/wp\/v2\/tags?post=8452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![notes-from-the-field-at-home-with-the-challengers-of-u-k-banking](\"https:\/\/hamiltonetfs.com\/wp-content\/uploads\/2017\/06\/2017-06-05-UK-Banks-min.jpg\")
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\n[2]<\/a> IFRS 9, which applies to all banks except those in the U.S. (which still operate under U.S. GAAP), goes into effect January 1, 2018 and (amongst other things) changes the way companies recognize losses from an \u2018incurred loss\u2019 to \u2018expected loss\u2019 model. As a result of this change, banks are currently adjusting and\/or building the necessary models to meet the standard requirements.<\/p>\n","protected":false},"excerpt":{"rendered":"