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Bank stocks will soon yield more than the debt of developing countries like Mexico and Brazil

https://www.cnbc.com/2019/06/26/bank-stocks-will-soon-yield-more-than-the-debt-of-mexico-and-brazil.html

 

Not a revelation to most here on valuation but, a different perspective to compare them to other instruments. They still seem to suffer from really bad memories from 08/09, aftermath and fear of a repeat.

 

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Bank stocks will soon yield more than the debt of developing countries like Mexico and Brazil

https://www.cnbc.com/2019/06/26/bank-stocks-will-soon-yield-more-than-the-debt-of-mexico-and-brazil.html

 

Not a revelation to most here on valuation but, a different perspective to compare them to other instruments. They still seem to suffer from really bad memories from 08/09, aftermath and fear of a repeat.

 

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What will happen with profits, if we go Japan and Europe with interest rates? It is my belief, that most of the outperformance of US banks vs Europe is not due to better management, but just structurally higher NIM’s. US banks quite frequently generate 3.5% NIM’s but in Europe, the margins are typically <2%, with the exception of Britain. Britain never adopted the Euro and kept their own monetary policy and has only few large banks competing and that’s why the NIM’s in the UK are more like the US rather than the rest of Europe.

 

However, if we go down the same rabbit hole then Europe does in terms of interest rates, my belief that US banking NIM’s will follow and lead to a structurally lower profitability. There are other differences between the US and European banking, but the NIM is the main one.

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