News archivos - Page 445 of 567

La banca privada suiza y su "annus horribilis" — Photo: TonnyB. Switzerland's Private Banks Go Through Its “Annus Horribilis”

Declining profitability and simultaneously low growth in assets over the past year have negatively impacted the performance of private banks in Switzerland. More than a third of them posted losses during the 2013 business year. Another equally significant factor behind private banks’ poor performance is the influence of the US tax program which prompted a total of CHF 900 million in provisions to be created in 2013 at the banks analyzed. Moreover, half of the smaller and medium-sized banks are reporting an outflow of assets. These insights were revealed by a study performed by KPMG and the University of St. Gallen (HSG).

Pressure on Switzerland’s private banks remains high, a fact that will encourage continued consolidation at the accelerated pace which already set in, noticeably, in 2014. Banks must ask themselves whether the time has come to make lasting changes to their business model or whether they would prefer to pull out of Switzerland’s private banking market. Private banks also need to reduce their cost base and try to exploit their growth opportunities despite the difficult conditions and stagnating assets under management. The financial performance of 94 Swiss private banks between 2006 and 2013 was assessed based on an analysis of their annual reports within the scope of the “Performance of Swiss Private Banks” study.

Among otherfindings of the study, one in three private banks is operating at a loss: The results of the study clearly show that more than one third of private banks in Switzerland reported losses during the last business year whereas this only held true for around a fifth of those banks in 2012. Not only that, but 59 of the 94 banks analyzed saw continued declines in terms of performance or merely succeeded in stabilizing their downward trend in 2013.

Return on equity declining at most banks: 36% of private banks report continuous drops with an average return on equity of 4.5% between 2006 and 2013. Most of these banks reported negative returns on equity in 2013. Another 28% of private banks also suffered a decrease in their return on equity yet still succeeded in stabilizing it at around 4% over the course of the past four years. There are also some banks that show greater potential. 16% of private banks boasted strong performance during the entire post-crisis period with an average return on equity of 14.9%. The remaining 20% of banks managed the turnaround with low yet rising returns.

Outflow of assets under management at small and medium-sized banks: Assets under management have remained relatively stable over the past six years. The underlying figures, however, reveal vast differences in the performance of individual private banks. 54% of small banks and 50% of medium-sized banks experienced net outflows of their assets under management during the 2013 business year. Net new money (NNM) for all of the banks analyzed only amounted to CHF 18.6 billion last year. The vast majority of this positive net new money was deposited at the big banks.

US tax program leads to drop in return on equity: Provisions for the US tax program came to a grand total of CHF 0.9 billion at the end of 2013. In their 2013 financial statements, 21 of the 94 private banks analyzed had created provisions for potential fines and consultancy fees while another 11 banks only created provisions to cover consultancy fees. The analysis revealed that the remaining two thirds of those banks have only created small provisions or none at all. In the near future, continued increases can be expected in terms of both provisions and expenditures.

Personnel expenses remain high: Over the past few years, average personnel expenses have remained stable at around CHF 213,000 per employee and have even risen further at the large banks. Despite the fact that personnel expenses account for about two thirds of a private bank’s typical cost base, there are hardly any indications that efforts might be made to cut these costs. This reluctance severely limits opportunities to boost profitability.

Consolidation is accelerating: A significant rise in M&A activities was observed in mid-2014. Some CHF 125 billion in assets under management were sold in nine M&A deals in the private banking sector during the first seven months of this year. While the number of transactions still hasn’t quite reached the level seen in 2013 as a whole (12 deals), the volume of assets under management sold within the scope of M&A transactions is already five times as high. The pace of M&A activities will probably continue to pick up since shareholders of private banks are increasingly asking themselves whether they really want to keep investing in their unprofitable banks. Clarity is expected regarding the fines related to the US tax program and this is also likely to prompt an increase in deals during the second half of the year.

Market share of big banks growing rapidly: In 2013, a combination of organic growth and M&A transactions allowed big banks (with assets under management of over CHF 25 billion) to boost their market share by a third over 2006. At present, they command 78% of total assets under management. The 58 small banks (assets under management of under CHF 5 billion), however, account for less than 8% of assets under management.

For those banks that failed to achieve their goals during the past year, the question is: Which of them will be in a position to return to a growth trajectory and which will withdraw from the market? “All in all, larger banks seem more likely to be on the winning side of things. They’re earning the highest returns on equity and continuing to expand their market dominance. Within this new reality of low asset growth and declining returns on equity, successful private banks certainly include those that are able to cut their average personnel expenses and simultaneously expand the business area – regardless of their size,” says Christian Hintermann, Head of Transactions & Restructuring Financial Services at KPMG Switzerland.

Strong U.S. Earnings Season Bodes Well for Stocks

A strong first half for US company earnings bodes well for stocks over the rest of the year, as the country continues to set the tone for global growth, says Robeco strategist Peter van der Welle.

Investors may increasingly look to the US for equity market returns later this year as the European economy remains sluggish, the end of tapering potentially threatens momentum in emerging markets, and the jury is out over whether ‘Abenomics’ is still working in Japan.

Two in three of the S&P 500 members that have so far reported first-half earnings have announced profit figures that were higher than expected, and US earnings are now at an all-time high. Their 3-month forward earnings forecasts for the next 12 months are also positive.

Earnings growth has averaged 10% on an annualized basis, thanks to record profit margin levels of 9.4% and increased sales. Profit margins have been sustained at record levels, helped by declining capital market interest rates since the start of the year, and by subdued wage rises.

“Sales growth is increasing as real US GDP growth rises and that should keep profit growth close to 10% for all of this year,” says Van der Welle. “The main component has been sales growth and very high profit margins, and the fundamentals remain healthy.”

US earnings are streets ahead of other regions in the world

Source: Robeco.

However from this point forward the upside is more limited, as US rates eventually start to rise and amid increased concerns about rising geopolitical risk, Van der Welle says. Indeed, worldwide equity markets tanked in the first week of August as the Iraqi conflict reared its head again, leading to a resumption of US air strikes.

Much depends on how US growth translates into company profits. Over the past 20 years, a 3% rate of real growth would have generated earnings growth of around 14%, but that is no longer to be expected. This is due to the current economic environment specifics; record high profit margins are not likely to expand further with higher interest rates, and ultimately, gradual rising wage pressures will negatively impact margins as well.

End of easy money

And of these expected headwinds for US earnings, it is the end of easy money which poses the biggest challenge for companies, Van der Welle warns. “We’ve seen lower rates with Treasury rates of 2.4% since the start of the year, and this has contributed to sustained profit margins,” he says.

“Companies will have locked in current rate costs in their planning through hedging and so forth, but rate rises will eventually feed into debt costs moving forward. We still hold the view that Treasury rates will increase towards 3%”

Despite the recent stock market correction, Van der Welle thinks investors will soon go back to looking at improved corporate fundamentals. “Many investors are waiting on the sidelines to see how the current geopolitical picture plays out,” he says. “We had a 4% correction in the S&P 500 due to Iraq and Ukraine, but a technical correction had been long-awaited since the last correction in January. We still have some geopolitical risk, but eventually the market will look through it and focus on the more positive earnings picture.”

Capex rises as predicted

Van der Welle says the positive US corporate outlook bodes well for increasing capital expenditure as companies sit on billions of dollars of cash saved during the deleveraging period since the financial crisis.

“When you look at Q2 GDP figures we have seen on average a 5% rise in capex growth, which confirms our call from last March that it would rise,” he says. “The stronger than expected first-half sales figures also imply more capital expenditure (to keep up with demand), as there has traditionally been a good correlation between net sales growth surprises and capex.”

“But it’s too early to say that capex really is rebounding because we need to see a strong third and fourth quarter, so let’s not cheer too early.”

The Case for High Yield, Revisited

While volatility has recently increased in the high yield market, Neuberger Berman believes this has been largely driven by technicals, not a downturn in the underlying fundamentals that typically drive performance in the asset class. On a recent Whitepaper (15th August), they discuss the current fundamentals in the high yield market and its performance in different economic environments.

According to Dan Doyle, CFA, Portfolio Manager at Neuberger Berman, rate and political worries aside, conditions are supportive.

“After 10 consecutive months of posting positive returns, the high yield market experienced a setback in July 2014. Triggering this weakness, in our view, were technical factors—not a reversal in underlying fundamentals. More specifically, geopolitical issues in Ukraine, Gaza and Portugal, coupled with the Argentine bond default, negatively impacted investor sentiment. Adding fuel to the fire was robust second-quarter GDP growth that led to expectations that the U.S. Federal Reserve would tighten monetary policy sooner than previously expected. While geopolitical issues are likely to continue, we believe the high yield market experienced nothing more than a short-term correction and some profit taking—and we wouldn’t be surprised to see a fairly quick rebound”, explains.

Generally speaking, high yield performance is driven by fundamentals, such as defaults, as well as the direction of the overall economy. Against this backdrop, they believe that the high yield market remains healthy.

One of the reason is the strong corporate fundamentals. “While volatility has increased, we feel there are many reasons to remain optimistic about high yield. First, corporate fundamentals continue to be supportive, in our view, given generally healthy balance sheets, ample liquidity and cash flows that allow most issuers to handily meet their debt obligations. Against this backdrop, leverage in the overall U.S. high yield market remains modest at 4.1x (debt/EBITDA) versus 5.2x in 2009”.

New issuance is focused on refinancing

Many corporations have proactively capitalized on the current low interest rate environment to reduce their borrowing costs and extend their maturities. This is evident when looking at the charts below. In 2007, more than half of new issuance was used to fund aggressive actions, such as mergers and acquisitions and leveraged buyouts. Conversely, through the first half of 2014, 60% of new issuance has been used for refinancing.

Few bonds maturing—limiting default risk

Given the large amount of refinancing, a relatively small amount of high yield debt will be maturing in 2014 and 2015, minimizing pressure on borrowers. The high yield default rate has been—and we feel will continue to be—well below its historical average of 4% over the last 25 years.

To see the whole report, use this link

Workers Highly Value Their 401(k) but Are More Likely to Get Help Changing Their Oil Than Managing Their Investments

A new survey finds there is widespread recognition of the 401(k)’s importance, but many workers are not taking full advantage of its benefits.

The nationwide survey of 1,000 401(k) plan participants, commissioned by Schwab Retirement Plan Services, finds that a 401(k) plan is considered a crucial benefit by an overwhelming majority. When asked which benefits are “must haves” aside from health insurance, nearly nine in ten respondents (87%) say a 401(k) is a “must-have” benefit – more than disability insurance (45%), life insurance (42%), extra vacation days (34%) or the ability to telecommute (15%).

Although survey participants clearly want 401(k) plans and appreciate their role in working toward post-retirement financial security, most are not using professional advice that may help improve outcomes. In fact, respondents say they are much more likely to have someone change the oil in their car (87%) than have someone help them choose their 401(k) investments (24%).

According to the survey, on average participants spend roughly the same amount of time reviewing and choosing investments for their 401(k), a lifetime savings vehicle, as they do investigating cell phones, which are often traded in from year to year. And they spend more than twice as much time researching their cars before buying than they do evaluating their 401(k) options.

“Today, responsibility for managing their own retirement investments rests squarely on workers’ shoulders,” noted Steve Anderson, head of Schwab Retirement Plan Services. In fact, the survey finds that nine in ten participants are relying on themselves for the money needed to live in retirement and a majority are using their 401(k) as their primary or sole source of retirement savings.

“With so much at stake, the industry needs to take a more active role in delivering personalized investment advice to help individuals’ 401(k)s work harder for them,” Anderson added. “One-for-all default investments, such as target date funds or balanced funds, can’t be expected to meet the individual needs of workers. The industry can do better.”

Lost? Ask for Directions

The survey finds many participants are still unsure exactly how their retirement benefits work. Half of those surveyed (50%) say their 401(k) plan investment information is more confusing than their health care benefits information. Roughly one in three (34%) admit they feel a lot of stress when it comes to allocating their 401(k) dollars. More than half (59%) wish it was easier to choose the right 401(k) investments.

Today, many 401(k) plans offer some type of professional, personalized investment advice, which can be vital in helping people take better control of their investments. While many of the participants surveyed believe they would likely benefit from this type of assistance, relatively few are actually taking advantage of this critical resource. Specific findings include:

Less than one quarter (23%) of those with access to professional 401(k) advice say they have used it.
Among those not using advice, roughly half (49%) believe they would achieve better investment results if they did so.
A large majority of participants surveyed (70%) say they would feel extremely or very confident in their ability to make the right investment decisions if they enlisted the help of a financial professional. Only 39 percent feel that same level of confidence when making investment decisions on their own.

“Most people see a doctor when they’re sick or a mechanic when their car isn’t running, so why not seek professional help to manage something as important as their 401(k)?” said Anderson. “In many cases, there is a significant difference between how much people need for a comfortable retirement and what they are actually saving. With all of the information providers have about 401(k) participants – age, salary, account balance, savings rate, and more – why leave them on their own, or lump them into target date funds based only on their age when so much more can be done to personalize their savings plans? We know that professional advice can play an important role in helping people save more to bridge the retirement gap.”

According to the survey, six in ten participants are most likely to seek help with retirement planning once they start to approach retirement age, even though getting help sooner may lead to better outcomes. At Schwab Retirement Plan Services, Inc., participants who used third-party, professional 401(k) advice tended to increase their savings rate, were better diversified and stayed the course in their investing decisions.

Difference-Makers That Drive Outcomes

In addition to using professional investment advice, workers can take other steps to get more out of their 401(k) plans, and many survey participants already are. Some of these positive behaviors include:

An overwhelming majority (86%) of participants who get matching contributions from their employer say they are contributing at least enough to receive the full company match.
More than half of survey respondents (57%) have increased their 401(k) contributions in the past two years. Many say they did so because they were concerned about having enough money to retire comfortably.
While many 401(k) plans allow participants to take loans against their account, most of those surveyed seem to recognize that this is a poor choice, as loans can potentially derail a savings plan for years. According to the survey, three-quarters (76%) of respondents have never taken a 401(k) loan.

“With the 401(k) serving as a primary retirement income source for so many, workers and employers are both clearly focused on improving outcomes,” Anderson noted. “While there is certainly room for improvement, we see more workers developing the discipline to save and employers concentrating on impactful plan features like automatic enrollment, automatic savings increases and personalized advice, which can help drive the outcomes we all seek.”

This online survey of U.S. 401(k) participants was conducted by Koski Research for Schwab Retirement Plan Services. The survey is based on 1,000 interviews. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25-75 years old.

ILC Announced Agreement over Banco Internacional

Chilean Group Inversiones La Construccion, ILC, agreed to terms with Baninter (Banco Internacional, Baninter Factoring y Corredora de Seguros Baninter controlling stakeholder) in order to acquire the financial holding’s controlling interest.

The agreement will be carried out via holding creation in which ILC will have a 50.79% controlling interest after several transactions and capital increases in company subsidiaries.

First, ILC will acquire a stake in the three aforementioned companies (bank, factoring and insurance bróker) from Baninter: (i) a 37.13% stake of the bank, (ii) a 36.94% stake of the factoring company, and (iii) a 50.1% stake of the insurance brokerage company, implying a total price of UF 1,874,461 (~USD 77M) paid by ILC to Baninter.

Second, ILC will subscribe to two capital increases allowing for further stake in the first two companies: (i) the bank will carry out a UF 785,439.8 (~USD 32M) which after the ILC subscription will allow the latter to control a 50.1% stake and (ii) Baninter Factoring will carry out a UF 60,890.9 (~USD 2.5M) also implying a 50.1% stake for ILC.

Lastly, both ILC and Baninter will contribute their assets to the new parent company and will subscribe a shareholder’s agreement and joint action, leaving ILC with a 50.8% stake in the parent company.

Bank

The transaction opens up a range of opportunities in that the bank currently operates at a sub-par scale-loan market share is only ~0.6%) implying lower indicators as compared to industry peers. Trouble is current backdrop could worsen due to a higher competitive environment, stricter regulatory requirements, and liquidity and equity management changes post Basilea III implementation.

This environment may allow for business generation and cost synergies once the bank starts operating under ILC holding. Also, the transaction would enhance the company’s current equity base, handing over USD 35M in fresh resources enabling a scale uprade. LTM bank NIM is currently at 1.6% with a 68.5% efficiency ratio vs. industry’s 2.5% and 46.4%, respectively, which explains the bank’s current 5% ROE differential with system’s 18%.

Regarding other business they still have no relevant information to arrive to any conclusions, although the bank explains ~90% of capital so previous observations should not vary significantly. In short, they believe this is a long-term bet and short-term returns should not be expected, especially in a less-than-ideal economic backdrop.

Valuation

Available information is still not enough to reach definite conclusions; however, at first glance the transaction multiple seems in line or even higher than other banks with larger scale and profitability. The P/B multiple of the acquisition is ~1.6x, diluting towards 1.3x when pricing-in upcoming capital increases.

The Grupo Security acquisition showed a P/B ratio closer to 1.2x, even though the bank had a larger scale and an even more efficient ROE (~12%), excluding current higher inflation effect, and a 2.8% market share. This leads them to believe the transaction should be relatively neutral on share price.

Funds Society and Open Door Media Team Up to Grow in the Americas Region

Funds Society y la británica Open Door Media suman fuerzas en US Offshore, LatAm y Europa — Photo: Mattbuck. Funds Society and Open Door Media Team Up to Grow in the Americas Region

Funds Society and Open Door Media Publishing Ltd are delighted to announce an exclusive partnership. The two specialist media owners will work together to help asset managers with their marketing and distribution in Europe and Latin America.

Open Door Media Publishing Ltd (ODMP), publishers of InvestmentEurope, and Funds Society, publishers of the Funds Society website and newsletter, are delighted to be working together. Both InvestmentEurope and Funds Society are established, recognised brands amongst the communities that they serve.

Funds Society, based in Miami, owns the eponymous Funds Society brand www.fundssociety.com and targets those involved in fund selection in Latin America, Iberia and the US offshore market through its digital assets.

ODMP owns InvestmentEurope, a brand targeting those involved in the fund selection process, and serves this market with a monthly publication, app, daily newsletters and website www.investmenteurope.net. ODMP also organises events across Europe under the InvestmentEurope brand.

Looking ahead both groups will be working together across the media spectrum. Further details regarding events in Latin America and a publication will be announced in due course.

Elena Santiso & Alicia Jimenez, Executive Partners, from Funds Society commented: “We are delighted to team up with Open Door Media to offer our readers their proven expertise in the organisation of first class events for the investment community. Latin America and the US-Offshore market offer a thriving opportunity for asset managers looking to grow internationally. Our knowledge of the America’s offshore investment community combined with Open Door Media’s strong expertise working with international asset managers are key factors for the success of this new relationship”.

Nick Rapley & Louise Hanna, Founding Directors of Open Door Media Publishing Ltd, added: “Our business is to bring asset managers and their clients together wherever they are. Our partnership with Funds Society is hugely exciting and important insofar as this will allow us to create new events for asset managers to reach the investment community across Latin America and the US-Offshore market. Funds Society has a strong local presence and in-depth market knowledge which is invaluable to asset managers looking to grow in this region. We are thrilled to be working with them”.

Cyclical Drivers Remain Skewed Towards Greater US Dollar Strength

Investec Asset Management presents its latest Multi-Asset Indicator. The main catch is a stronger dollar, and a positive economic and investment outlook, especially for equities.

Economic data from the US is consistent with above-trend growth. For now, the US Federal Reserve (Fed) continues to highlight slack in the labour market, but if employment growth continues at close to its recent pace, the Fed is likely to move forward the date of the first interest rate rise to the first half of 2015. This should support a stronger US dollar, which is beginning to perform well, especially given softer inflation in Europe and some disappointing Japanese data.

Second-quarter corporate earnings have, once again, beaten expectations and company management teams are no longer guiding analysts’ estimates downwards. A combination of expected earnings growth of roughly 10% for this year, even stronger earnings growth the following year and forecasts stabilising after long periods of relentless downward revisions, has contributed to the passage of time slowly reducing the market’s valuation. This makes further market gains likely in the remainder of the year.

The clearest trends in developed market sovereign debt remained in euro-zone bonds, with German Bunds, in particular, extending into strength. Further evidence of a loss of economic momentum across certain sectors, another lower-than-expected inflation print and on-going geopolitical concerns all encouraged this strength. In contrast, data in the US remained firm, although US long rates remained at the lower end of their multi-month ranges.

July could represent a watershed for global corporate credit markets. Spreads widened across both investment grade and high yield markets, with credit quality determining the extent of weakness. US markets led the sell-off, accompanied by outflows from high yield ETFs. The sell-off in credit assets during July has improved valuations.

Across all currency markets, the dominant force in July was the broad-based strength of the US dollar. The most resilient G10 currencies to this strength were sterling and the Japanese yen which were secondary beneficiaries of a reduction in global risk appetite. An aggressive extension of the appreciation of the US dollar is improbable in the near-term, although cyclical drivers remain skewed towards greater US dollar strength thereafter.

Overall, the inevitable never-ending sequence of geopolitical events in various corners of the globe does not detract from a positive economic and investment outlook, especially for equities.

You may access Investec Asset Management’s full Multi-Asset Indicator through this link.

U.S. Markets: A Curious Investing Conundrum

El enigma de la economía americana: sube la bolsa, suben los bonos: ¿Hasta cuándo? — Wikimedia CommonsJames Swanson, Chief Investment Strategist at MFS. U.S. Markets: A Curious Investing Conundrum

According to James Swanson, Chief Investment Strategist at MFS Investments, we are experiencing an interesting combination in the US: “We have accelerating growth, rising profits and still, stable to falling interest rates”.

On the other hand, outside the US growth is faltering, especially in China, Japan, and recently, also in Europe.

Within this environment, James Swanson highlights that there are several signals supporting US Equities:

Rising revenues, profits and margins.
Capex has started to move up from relative low levels
Lending to financial companies and basic sectors is also begging to rise, something that hasn’t been seen for the last five years

In the attached video, James Swanson alerts investors to “be choosy, be diversified”, and to “focus on US large caps” which are doing very well, though “some support may be needed from slower outer markets”.

Schroders Announces New Hire to Strengthen Fixed Income Research