Lafferty: The World’s 15 Highest Rated Banks

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London-based Lafferty Group released a new ranking of global banks based on a variety of factors. This list has many surprises.

Here is a brief description of the methodology used:

Using quantitative and qualitative criteria and looking at areas such as strategy, culture, customer care, brand promise and financial performance, Lafferty Group uses the banks’ annual reports to arrive at a quality rating (from one to five stars) for each of 100 financial institutions in 28 countries.

The 15 financial institutions that received the highest ratings in the world are:

  1. Capitec from South Africa
  2. Barclays Africa from South Africa
  3. HDFC from India
  4. Discover from the US
  5. Public Bank from Malaysia
  6. Hong Leong from Malaysia
  7. OCBC from Singapore
  8. TSB from the UK
  9. Swedbank of Sweden
  10. Handelsbanken from Sweden
  11. National Bank of Kuwait
  12. ADIB from the UAE, and
  13. Sterling Bank from Nigeria
  14. Arab National Bank from Saudi Arabia
  15. BCA from Indonesia

Most of the major developed world banks received only a  3-star or 2-star Lafferty quality ratings. This is indeed interesting since they seem to dominate the world and the media. However this ranking shows that there are banks especially in the emerging markets that are better than their developed world peers based on certain factors.

I wrote an article many years ago about Sweden-based Handelsbanken. It is the world’s best stock in terms of returns even beating Buffet’s Berkshire Hathaway . Other than the two Swedish banks and the one bank from Singapore, rest of the banks in this list are from emerging and frontier markets.

Source: Large universal banks lag behind in new quality ratings, Bobsguide

Disclosure: Long Swedbank (SWDBY)

Also checkout:

The World’s Best Developed Markets Banks 2016 (TFS)

Mexico ETF vs. Brazil ETF

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“So far from God and so close to the US” – former Mexican President Porfírio Díaz

Mexico’s economy is closely tied to the US. So when US economy is in expansion mode Mexican economy grows and vice versa. Due to the close proximity to the US, Mexico is permanently in a better position in terms of trade ties with the US than other Latin American nations including Brazil.

Brazil is commodity-based economy and has been adversely affected by the slump in commodity markets in recent years. While Brazil has declined Mexico has held up well. The divergence in performance is also wide in terms of the equity returns of these two markets. Let’s take a look at the returns of the country ETFs over different periods to demonstrate the theory.

a) Year-to-Date Returns:

The iShares MSCI Brazil Capped (EWZ) is up by about 23% year-to-date. But the iShares MSCI Mexico Capped (EWW) has grown by only about 3.5%. But this tells only part of the story as the two charts in longer periods shows below. Besides Brazilian equities have run up from huge declines last year.Furthermore we still have nine more months to go and a lot can change during that time,

b) 5 -Year Returns:

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EWZ vs EWW 5 Years

In 5 years, Mexico ETF is down by 18% while Brazil ETF lost more than half of its value with a loss of 67%. Though both the countries are emerging countries, Mexico has performed better than Brazil in this period.

b) 10-Year Returns:

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EWZ vs EWW 10 Years

Source: Yahoo Finance

The variance in returns over the 10-year period is even higher. The Mexico ETF rose by over 43% while the Brazil ETF declined by 31%.

So from an investment standpoint, it is wise to have exposure to the Mexican market when considering emerging markets.Low dependency on commodities and good manufacturing base with strong ties to the US market are strong plus points for Mexico.

Disclosure: No Positions

Average Stock Dividend Yields By Country

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Dividend yields are generally higher overseas relative to the U.S. market. In the U.S. investors and management tend to prefer high share prices while in other developed economies investors prefer both moderate price appreciation and high dividend payments.

The following chart shows the Average Stock Dividend Yields in G-20 countries:

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Dividend Yields by Country Jan 2016

Source: The Dividend Signal Uncovering Global Growth Opportunities, Salient Partners

Here a few points to remember when investing in foreign stocks for dividends:

  • Other developed countries such as France, Germany, UK, etc. have higher average dividend yields than the U.S.
  • Even just venturing Canada one can earn more than 3% dividends compared to the average of around 2% to US stocks.
  • South Korea, India and Japan are low dividend countries and hence income investors can avoid dividend stocks in those countries.
  • Investing in foreign stocks for dividend involves dividend withholding taxes.So investors should be mindful of the effects of this tax and try to avoid it if possible.

Credit Suisse Global Investment Returns Yearbook 2016

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Credit Suisse published the popular Global Investment Returns Yearbook for 2016 last month. The report contains a wealth of data especially from a long-term and country-specific perspective.

The following is a sample chart from the report. It shows the relative shows of the equity markets by country at the end of 1899 and 2015:

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Credit Suisse Global Investment Returns Yearbook 2016 World Equity Market Sizes 1899 and 2015

The US equity market capitalization of the end of 1899 was just one-fourth of the world markets capitalization. Today it accounts for over 52%. UK on the other hand fell from over 25% of the world market size to just about 6% now.

Credit Suisse Global Investment yearbook 2016

Download the full Credit Suisse Global Investment Returns Yearbook for 2016  report (in pdf) by clicking on the above image.

Source: Credit Suisse

Related: Download: Credit Suisse Global Investment Returns Yearbook 2015

Majority Of American Workers Do Not Have A College Degree

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Higher education is a big business in the U.S. Every year millions of students graduate from schools across the country with billions of dollars in student loan debt. Tuition at both public and private universities and colleges have increased year after year with demand for getting a degree going only higher.

In an article a few years ago I wrote about some of the reasons for the ever increasing college tuition in the U.S. One of the main reason for the craze to get a degree is that employers are increasingly demanding a degree even for a job that requires just English reading and writing skills. The most basic of a job function such as secretary for the front office requires a college as if a degree is needed to take phone calls, take notes, making hotel reservations, decorate office buildings with balloons for a party, etc.

Though a college degree has become mandatory to get any decent job, that rule seems to apply only to new workers joining the workforce in the past couple of decades. Many of the workers that already in the work force do not have a degree. In fact, according to a study by EPI more than two-thirds of American workers do not have a college degree.

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US Workers College Degree By State

From the EPI report:

Almost two-thirds of people in the labor force (65.1 percent) do not have a college degree. In fact, people without a college degree (which includes those without a high school degree, with a high school degree, some college education, and an associates’ degrees) make up the majority of the labor force in every state but the District of Columbia. Mississippi has the highest share of non-college educated workers (75.7 percent) while Massachusetts and the District of Columbia have the lowest shares (51 percent and 33.7 percent, respectively).

While this two-thirds figure looks surprising college degree was not needed to get a job many decades ago. In fact, going to college was a privilege and not a right and few bothered to get a degree as it was demanded by companies. Millions of workers led a comfortable middle-class life working in auto factories, appliance factories, etc. without needing a degree. Many of those older workers are still in the labor today waiting to retire. In the future, getting a degree would be the equivalent of getting a high school diploma.

Source: Almost two-thirds of people in the labor force do not have a college degree, EPI, Mar 30, 2016