List of Surplus and Deficit Countries of Europe

Posted by on

One of the factors considered by investors when selecting a country for investment is the amount of deficit/surplus held by that country.Generally surplus countries are better than deficit countries.

The following chart shows the general government deficit/surplus as a percentage of GDP countries in Europe as of 2008:

Surplus-Deficit-Countries-in-Europe

Source: Statistics Norway

Scandinavian countries top the ranks of surplus countries in Europe. Norway had the most surplus in Europe with about 18% of GDP followed by Finland, Denmark, Luxembourg and Sweden. The countries with the highest deficits were Ireland, UK and Romania. Deficits in Ireland and UK were more than the double of the maximum EU requirement. Many of the East European countries such as Latvia, Estonia, Lithuania have high deficits. The economy of these Baltic countries fell heavily last year during the height of the credit crunch.Similarly the British and Irish economies collapsed as well.

Related ETFs:
Global X FTSE Nordic 30 ETF (GXF)
iShares MSCI Sweden Index (EWD)
iShares MSCI Netherlands Investable Market Index (EWN)
iShares MSCI Germany Index (EWG)

Top 10 Banks of Australia by Assets, Deposits

Posted by on

The Top Ten Australian Banks based on Assets and Deposits as of June 2009 are listed below. This list was compiled with data from the “Monthly Banking Statistics” report released by the Australian Prudential Regulation Authority (APRA) on July 31st.The Top Ten Australian Banks by Assets

[TABLE=175]

The Top Ten Australian Banks by Deposits

[TABLE=174]

The five large banks in terms of both assets and deposits are Commonwealth Bank of Australia,National Australia Bank Limited, Westpac Banking Corporation,Australia and New Zealand Banking Group Limited and St.George Bank Limited. Assets is defined as the “Total gross loans and advances” in the APRA statistics report.Except St.George Bank, all the other four banks are also the Australia’s most valuable brands according to BrandFinance. In 2008, these four banks were in the top 10 list with National Australia Bank Limited ranked as the number one brand.

Australian companies usually have high dividend payout ratios and dividend yields as shown in the chart below:

Australia-Companies-Dividend-Yield

The current yields of the top 5 banks are shown below:

Commonwealth Bank of Australia(OTC: CMWAY)
Dividend Yield: N/A
Started trading from March this year

National Australia Bank Limited(OTC: NABZY)
Dividend Yield: 5.18%

Westpac Banking Corporation(WBK)
Dividend Yield: 4.63%

Today Westpac posted earnings of $1.1 billion in the first quarter but bad debt went up to to $865 million from $811 due to deterioration in commercial real estate and New Zealand.

Australia and New Zealand Banking Group Limited(OTC: ANZBY)
Dividend Yield: 4.57%

St.George Bank Limited(OTC:STGKY)
Dividend Yield: N/A

Australian housing market has held up well since the recession began as the demand for housing is high but the supply is down. As the domestic economy and the Asian countries recover Australian banks must do well.

Three Top Performing Financial Services Funds

Posted by on

In the Fund Track column Not All Bank Funds Fell Over Past Year on August 13, The Wall Street Journal highlighted three top performing financial services mutual funds. These three funds were up in the past year when most financial stocks and ETFs collapsed. Two of the funds were up more than 10% in the past year. In addition, all three funds were ahead of their peers in this sector. A brief summary of the three funds is presented below.

1. Dryden Financial Services Fund (PFSAX)
Total Assets: $139.5 M
Yield: 0.20%
Expenses: 2.19%
Foreign Stocks: 52.9% of portfolio
Performance YTD: 71.54%

The top three holdings are Canadian banks Bank of Nova Scotia (BNS), Toronto-Dominion bank (TD) and Norwegian Bank DnB NOR ASA.  The fund manager Mark Lynch said:”Canadian banks came through [the crisis] the strongest of any in the world”. The Morningstar rating for the fund is 5-stars and is the number one fund in the category. Other holdings in the portfolio include Nordea bank, BNP Paribas, Societe Generale, Itau Unibanco (ITU), Svenska Handelsbanken, etc.

2.FBR Small Cap Financial Fund (FBRSX)
Total Assets: $189.9M
Yield: 1.17%
Expenses: 1.49%
Performance YTD: 24.14%

FBR Small Cap Financial is a small cap value fund. The top 3 holdings are Webster Financial Corporation, Fifth Third Bancorp (FITB) and Astoria Financial Corporation (AF). In 2008, the fund was down just 8.7%.A few other stocks in the fund include: Glacier Bancorp (GBCI), Key Corp(KEY), First Horizon National Corporation (FHN) and Zions Bancorp (ZION).

3.Burnham Financial Services Fund (BURKX)
Total Assets: $55.0 M
Yield: 3.28%
Expenses: 1.60%
Performance YTD: 17.23%

This is a mid-cap fund with a small asset base of just $55M.  The fund has been avoiding companies that are focused on real-estate in bubble areas such as Arizona, Nevada, California and Florida.

Top holdings in the fund are JP Morgan Chase(JPM), Bank of America(BAC) and Chimera Investment Corporation(CIM). In 2008, the fund had a negative return of 14.8%.

As for the strategy about picking financial stocks in this market, David Ellison, manager of FBR Small Cap Financial Fund said “in some ways the financial sector today is “playing like biotechnology stocks. You take a chance on names that may or may not make it, but if they do make it you’ll win big.” I would agree with his opinion.Indeed most of the bank stocks have become like biotech stocks of the dot com era.Nobody knows which bank would  survive or which bank Uncle Sam would forcibly seize and offer to one of the “too-big-to-fail” banks at dirt-cheap prices. The seizure and subsequent sale of Wamu and National City are some examples.

Note: All data  is from Morningstar. Please do you own research before making any investment decisions.

Tier 1 Capital Ratios Comparison: U.S. Vs. European Banks

Posted by on

On August 20th, the Journal had a piece titled “At Europe’s Banks, Riskier Tack on Capital” discussing the financial strength of European and U.S.banks.

Banks in continental Europe have strengthened their finances through  “strong earnings, benign markets, dividend cuts and some asset sales”. However unlike their British and American peers, they have not increased their capital by issuance of shares. “So far this year, banks on the Continent have raised only $11.6 billion in new equity capital, compared with $48.3 billion in the U.S. and $26 billion in the U.K., according to figures from Dealogic.”

Continental European bank’s reluctance to raise new capital easily by issuing shares is good for existing shareholders. Long-term investors hate it when companies dilute their holdings by issuing new shares.

However as the article mentions, in the U.S. most banks don’t give a second-thought of issuing new shares. For example, regional bank BB&T (BBT) issued 33.5 million shares at $26 per share on August 18th raising $837.1 M. Four days before the new offering on August 14th, BB&T bought the failed Colonial Bank of Alabama.

Some other examples of share offerings include:

Suntrust (STI) – 124.3 million shares at $13.00 per share
KeyCorp (KEY) – 205.4 million shares at $4.87 per share
U.S. Bancorp (USB) – 139 million shares at $18 per share

Big banks in the U.S. have raised billions of dollars in such new share offerings. One of main reason cited by these banks to issue shares is to raise their capital levels to bring it to the levels required by the regulators that conducted the stress tests. So in a way regulators helped banks dilute the holdings of existing shareholders.

Tier 1 Capital Ratios of select US and European Banks:

Tier1-Capital-Ratios-Europe-US-Banks

Source: The Wall Street Journal

In continental Europe, Swiss-banks UBS (UBS)  and Credit Suisse(CS) have strong Tier 1 capital ratios at 13.2% and 15.5% respectively at the end of June. This is higher than the Tier1 ratios of US banks like Citibank(C), JP Morgan Chase (JPM) and Bank of America (BAC). To bring up Tier1 to at least 10%, BNP Paribas (BNPQY), BBVA(BBV) and Banco Santander(STD) and Unicredit must try to increase their earnings.

ADR Stocks Listed in the NYSE in 2009

Posted by on

The appetite for foreign stocks among U.S. investors is high since last year despite the credit crisis and the current recession.Last year’s market performance proved that the so-called decoupling theory of emerging markets being different from the developed markets is not entirely correct. In fact,many of the emerging market indices such those in Russia, India, Brazil, China actually fell much more than the developed market indices.

U.S. investors’ attraction towards overseas stocks started increasing after the dot-com bubble burst.These investors hold foreign stocks for a variety of reasons like diversification, high dividend yields,explosive growth in emerging markets,etc.The interest in foreign company stocks via American Depository Receipts (ADRs) continued thru the crisis last year.According to Bank of New York Mellon’s ADR site over 735 New Depositary Receipt Programs from around the world were introduced between Oct. 1,’08 and Aug.17,’09.The majority of these companies were listed in the OTC markets.Some of the well-known companies listed in the OTC markets include: Credit Aricole(CRARY) and Careefour (CRERY) of France, Linde (LNAGY) of Germany,Konica Minolta(KNCAY) of Japan,Standard Bank(DBGOY) of South Africa.The 735 ADRs have very thin daily trading volumes since they are new and are not listed in the organized exchanges.

Four foreign stocks were listed in the New York Stock Exchange this year (Source: The Bank of New York Mellon DR Directory). Lets take a quick look at these four companies.

1.China-based Chemspec International Limited (CPC) is a contract manufacturer of specialty chemicals. The ADR effective date was June 24, 2009. The current market cap is $246M and the company pays no regular dividends. Total sales in 2Q,2009 was $34.2 M, an increase of 8.1% from 2Q,2008. Net Income amounted to $7.9M. Chemspec holds US$69.3 million in cash primarily from the proceeds of IPO.

2.Duoyuan Global Water(DGW) is a domestic water treatment equipment supplier in China. “The Company’s product offerings focus on addressing the steps in the water treatment process, such as filtration, water softening, water-sediment separation, aeration, disinfection and reverse osmosis. It offers a set of more than 80 complementary products across the three product categories: Circulating Water Treatment Equipment, Water Purification Equipment and Wastewater Treatment Equipment.” Since pollution is a major problem in many Chinese cities Duoyuan may be a good pick. Since its June launch, DGW is up more than 50%. The stock closed at $30.42 last Friday. The P/E ratio is 78.81.

3. Denmark-based fixed-line telecom services provider Invitel(IHO) started trading in New NYSE Amex in late February. Invitel has operations in Romania thru its subsidiary Euroweb Romania. The company provides its services to about 17% of population in Hungary. IHO is down 23% since its IPO. “Invitel Holdings’ net income attributable to ordinary shareholders for the quarter ended June 30, 2009 was EUR 16.7 million, or EUR 1.00 per ordinary share”.

4.Votorantim Celulose e Papel(VCP) is a pulp and paper products company based in Brazil.The company also makes wood-free printing and writing papers and specialty papers. VCP is up 114% YTD. Votorantim has 390M shares outstanding and the beta is 2.9.