Daily Wisdom: Ireland’s Bad Bank Edition

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Despite its troubles, Mexico still offers opportunities.Mexico: NAFTA ’s third amigo

European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, to support banks during the credit crunch, according to a European Union document. Bank Rescue Costs EU Governments $5.3 Trillion, Surpassing Germany’s GDP

When Jeff Bezos put Amazon in the business of selling third-party goods, investors feared margins would erode. Look what happened instead.The third man

This is a tough question to answer. But I can provide an answer of a mechanical sort. Consider how big the Chinese economy is, compared against the US, the Euro area and Japan.How Important Is China to World Growth?

As Ireland reels from its banking woes, a fierce debate is under way as to whether the government’s ‘bad bank’ solution will be enough to open a route to recovery or whether widespread bank nationalisation is a more realistic option. A ‘bad’ solution for a battered economy?

Photo: Frankfurt Stock Exchange

A look at Repsol and Sasol ADRs

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Repsol(REP) and Sasol(SSL) operate in the integrated oil&gas; and energy & chemical industries.

Out of these two, Sasol(SSL) is an interesting company since its portfolio of assets is diverse. The company “mines coal in South Africa, produces gas in Mozambique and oil in Gabon, and its chemical manufacturing and marketing operations span the globe”. In South Africa, it runs 406 Sasol retail convenience centers and Exel service stations. The average annual earnings growth for Sasol is 27%. Last year Sasol has nearly $20B in total revenues.

Spain-based Resol(REP) is “an integrated oil and gas company engaged in all aspects of the petroleum business, including exploration, development and production of crude oil and natural gas.”The current yield is 6.32%.Average annual revenue growth rate is about 11%. Resol is an average performer as the earnings grew at 7% annually in the last 5 years.It has a debt to total capital ratio of 43.33% which is in-line with its peers in the Oil & Gas – Integrated industry.

The Best Emerging Market Banks in Latin America 2009

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The Global Finance magazine published the “Best Emerging Market Banks in Latin America” for 2009  in the May issue.This is the sixteenth year the magazine has ranked the top banks in the emerging markets.

These top-performing banks  were selected based on the following factors:

  • Growth in assets
  • Profitability
  • Strategic relationships
  • Customer service
  • Competitive pricing
  • Innovative products

Releasing the list, Joseph Giarraputo, publisher of Global Finance said “We are in a unusually challenging environment for banks and their customers.More than ever, customers are demanding superior competence from their banking partners. These are the banks best providing that competence.”

The following table shows the top banks for 22 countries in Latin America. If the bank is listed the US markets, the ticker is included.

[TABLE=153]

Source: Global Finance Magazine

Banco Macro of Argentina(BMA) has more than tripled since the March lows.Currently it has an yield of 5.21%. Brazil-based Itau Unibanco (ITUB) was formed by the merger of Banco Itau Holding Financeira SA and Unibanco. Itau Unibanco is one of the largest private-sectors in Brazil. Itau Unibanco is one of the few foreign banks that pay a small monthly dividend. ITUB  competes with the other large private-sector   bank Banco Bradesco (BBD).

Banco Santander-Chile(SAN)  operates a network of 477 branches countrywide. The current yield is 4.74%. Bancolombia SA(CIB)’s dividend yield is 3.13%. In addition to 717 branches in Colombia, the bank has operations in El Salvador, the United States, the Cayman Islands, the British Virgin Islands, Panama, Peru and Puerto Rico. Bancolombia is part of Grupo Bancolombia which has many entities in the financial sector in Colombia.

Scotiabank Jamaica and Scotiabank Costa Rica are subsidiaries of the Canadian bank Bank of Nova Scotia (BNS). BBVA Banco Continental & BBVA Banco Provincial are group companies of the Spanish banking giant Banco Bilbao Vizcaya Argentaria, S.A. (BBV) and Banco Santander Uruguay and Banco Santander Puerto Rico are subsidiaries of Spain-based Banco Santander group.Banamex, a subsidiary of Citibank, is Mexico’s second largest bank with 1,233 branches.

Is there a Canadian Bank ETF?

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Unfortunately there is none that trades in the US markets. However there is the iShares CDN Financial Sector Index Fund (XFN.TO) listed in the Toronto Stock Exchange (TSX). US investors who have access to TSX, can invest in this ETF to get exposure to the big five Canadian banks and a few other financials.

Many investors are interested in Canadian banks now due to their resilence and strenth during the credit crisis when banks in many developed countries like the US, The Netherlands, US, etc. have failed. The country-specific iShares MSCI Canada ETF (EWC) gives broad exposure to the Canadian markets but does not provide the sector-specific concentration on banks and related financials.

The iShares CDN Financial Sector Index Fund (XFN.TO) has an asset base of C$939M and the portfolio has 24 holdings. The expense ratio is 0.55%. As of the end of May this year, the ETF is up 19.78%. To put this in perspective, the financials in the US S&P; 500 Index is down 0.76% year-to-date. The S&P; 500 as a whole is up 4.34%.

Just the three large banks – Royal Bank of Canada, TD Bank and Bank of Novo Scotia – account for about 50% of the fund. The fund also contains Bank of Montreal, CIBC and a few other banks like National Bank of Canada, Canadian Western Bank and Laurentian Bank of Canada.

In addition to banks, XFN also contains a few insurers such as Great-West Lifeco , Sun Life Financial, Manulife Financial, etc.

For more info on this ETF, click here.

Daily Wisdom: UK Recession Almost Over Edition

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The UK recession has almost run its course, according to the respected NIESR forecasting group, as it reported that the economy grew in April and May..‘UK recession is all but over’ – NIESR

A new government report shows that the former East Germany has been less bruised by the economic crisis than the richer West. The region has more smaller companies that are more flexible and less dependent on exports, it argues.Eastern Germany Less Hard Hit than the West

THE stockmarket wants to see blue sky. It seems every positive news point is grabbed with glee and, this, of course, carr…Between doom and boom

Rural workers pay hidden cost of biofuels in Colombia Palmed off

Money is flowing back into emerging and frontier markets. Africa is a mix of the two, and arguably has the best growth prospects of any region in the world.An African ETF That Gets You Into the Last Great Resource Frontier