Fed indication of higher rates --> higher earnings on deposits --> higher financials
Financials are in a sell-off (just like pretty much everything now) after Brexit. I want to choose between HSBC, Wells Fargo, and JP Morgan in the near future for a 5-10 year horizon, focusing primarily on a sustainable dividend and whatever capital appreciation comes along. I read about how US banks have much better balance sheets that their Euro counterparts, but after looking at their financials I don’t really see how that’s the case. HSBC’s debt to capital ratio is 1.22, while that of WFC and JPM is 1.74 and 2.34 respectively. HSBC’s debt to total assets is also lower. HSBC’s dividend yield is about double that of WFC and JPM, and it has a history of consistently paying out dividends (except for the cut during the great recession).
No idea about ratios, but HSBC is a POS company that is mismanaged into the ground. Every single person working there is running for the exit, and this Brexit is throwing them into full blown panic. Maybe it is a reasonable trade to buy the stock in anticipation of a short term bounce. However, absent of that, I would run as far as possible from this pile of crap.
Agreed on HSBC. Just had a meeting with their relationship manager… which was just brutal. He said “you know” about 50 times in a 45 minute meeting.
Also… I have been in contact with their UK office and haven’t heard back regarding my request to open an account there for the last two weeks… keep emailing to follow up but all I get are crickets…
agree wtih my boy Ohai on HSBC. although i remember reading here that someone was trying to pick it up (might be in the Brexit thread) for a quick flip?
2 dudes fronrunning trade of client. made $3mil in profit and $5mil in fees.
cool cover up story as well.
HSBC might in big trouble because “A criminal conviction in the forex matter could reopen the deferred prosecution agreement that HSBC signed in 2012 to avoid charges for breaching sanctions and anti-money laundering rules, which is due to expire next year.”
If you’re looking at safer banks within Europe, I suggest you look at the German (ex Dutsche) and scandanavian banks. Outside Germany and Scandinavia, there’s always a risk hovering on European Banks. But in general, adding banks in developed markets is not a good idea ATM. Fed is so jittery, I doubt they would even raise rates in December.
Not trying to be rude but you need to do some serious research on banking capital.
Debt to capital is meaningless. Look at fully-phased in teir 2 capital, SLR, TLAC, NSFR, and standardized and advanced CET1 ratios.
After that start looking at their asset and funding composition and costs, net interest income and funding and lastly the results of their CCAR test that will allow them to buyback shares. Look at trading turnover, liquidity, HQLA and other metrics.
Non performing assets, allowance to loans, capital to assets, return on assets, return on equity, funding costs, asset vs liability sensitive. Net charge offs. Not sure why you are looking at debt, Banks are nothing but debt and a lil equity. Some debt is referred to as capital. But capital has a slightly different definition than most industries
It’s also pretty obvious that many bank asset values are made up or manipulated somehow. Whenever DB announces some loss due to “reserve adjustment”, it means they just admitted that their mark to market was too aggressive before. If anything, expect these sketchy and struggling institutions (DB, HSBC, CS, BOFA) to have even more hidden adjustments somewhere. In general, people trust JPM’s management and believe that WFC is extremely conservative in its internal valuations. So maybe their ratios that appear worse than other banks’ should be interpreted in terms of quality of reporting.