Insights on the Global Financials

U.S. Banks: Will Mid-Cap Bank M&A Accelerate Post-Dodd-Frank Rollback (3 Deals in 3 Weeks)?

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”). Read More»

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 taken the unusually harsh step of restricting the bank’s balance sheet growth; specifically, its total assets are not to exceed those as of 2017 year-end. Read More»

U.S. Banks: High/Low Growth Areas in One Map (i.e., “Follow the Sun”)

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[1]) with a population greater than 1 million and nearly 40 with a population greater than 1.5 million (hereafter referred to as “large MSAs”). And there are huge differences in population growth and GDP growth between these different regions/markets. Read More»

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. Read More»

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 prices of the banks we met on the trip to Italy have increased between ~15% and ~30% year-to-date, indicative of investors’ views that an Italian economic recovery is underway (real GDP expected to increase by at least 1.0% for the first time since 2010[1]). The Hamilton Capital Bank ETF (HBG) currently has ~3% exposure to Italian financials, while the Hamilton Capital Global Financials Yield ETF (HFY) has ~2% exposure. Read More»

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 to see how things are looking on the ground. Read More»

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. Read More»

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 dividend yields of the sector, the Hamilton Capital Global Financials Yield ETF (HFY), which has a net underlying yield of ~4.8%, only has a ~5% allocation to U.S. banks. Read More»

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