Monthly Archives: October 2015

Canadian Banks: New Federal Government Not (Likely) Significant to Banks

Last week, the Canadian federal election ended with a majority victory for the Liberal party. Although a minority win for the Liberals or governing Conservatives was seen as the most likely outcome according to the polls, the preferred outcome for the market (and the banks), in our view, was a Conservative or Liberal majority government. The worst plausible election outcome would have been a minority Liberal government supported by the socialist New Democratic Party, which likely would have led to fiscal policies less conducive to economic growth. Read More»

Business Development Corps: Notes from NYC Field Trip

We recently travelled to New York City to meet with executives from a group of business development companies (“BDCs”), a diverse category of “other financials” focused on yields. There are over 30 publicly traded BDCs in our investable universe, with market capitalizations ranging from ~$100 mln to several billion dollars. Yields for these financials are generally over 8%. Read More»

European Trip to London, Frankfurt, and Madrid: Notes from the Field

A recent trip to Europe – 3 days in London at a European financial services conference, and 1 day field trips to Frankfurt and Madrid – gave us an opportunity to meet with executives from more than 25 financial services companies and agencies (including 19 banks and 3 insurers) representing 9 countries. Notably, the trip reinforced our European investment thesis, although a disparity of country and subsector specific issues remain, leaving different companies (and countries) at different stages of recovery/normalization. Below, we outline our key takeaways from the trip. Read More»

Déjà vu? European Bank Credit Recovery Continues to Track U.S. Bank Recovery (2010)

Déjà vu? In this 3 slide presentation, we highlight how the recovery in European banks continues to closely mirror the recovery of U.S. banks at the same stage of the credit cycle (i.e., 2010). In particular, the experience of the HCP European Bank Fund LP, has been very similar to the U.S. bank experience from a few years ago – i.e., a substantial recovery of pre-cycle profitability in just over a year, during which stock prices remained relatively unchanged (slide #2). However, in the following four years, the ongoing normalization of U.S. bank profitability was a catalyst for a multi-year recovery in stock prices (slide #3).

EBF-Euro-Bank-Earnings-vs.-Stock-Prices-2015-10-21

 

Deutsche Bank Pre-Announces Charges, Possible Dividend Reduction

After the U.S. close last night, Deutsche Bank (ticker: DBK GR) announced a series of write-downs, an increase in its litigation reserve, and a Management Board recommendation to reduce (or possibly eliminate) its dividend in 2015. Most of the announcement was anticipated and/or priced in with the exception of the announcement the bank might eliminate its dividend. As a result, at the time of writing, the stock is actually up. Read More»

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