Enough on China
By Robert B. Albertson, Principal - The China factor has overwhelmed investor sentiment since its mini-devaluation. Despite market pullbacks, the case for U.S. interest rate normalization has not been fundamentally derailed, in our view, when a wider range of indicators is taken into account.
Changes to Small BHC Policy Statement - Implications for M&A, Capital Planning, and Investment Strategy
By Thomas W. Killian, Principal - The Federal Reserve’s Small Bank Holding Company Policy Statement provides a very real opportunity for 88% of U.S. BHCs to optimize their M&A Strategy, Capital Planning, and Investment Strategy.
Rate Relief Anyway?
By Robert B. Albertson, Principal - Rather than throwing up their hands on bank stocks, investors should closely review and search for banks whose balance sheet profiles promise upside earnings surprise when short rates do advance, even if long rates fail to follow.
Oil Price Implications
By Robert B. Albertson, Principal - Current energy sector dynamics are increasingly influencing investment strategies, with overly-simplistic local and geographic conclusions that are creating opportunities to buy financials.
Normal in Slow Motion
By Robert B. Albertson, Principal - While the past cycle may feel anything but similar to the past, if we compress the time scale since 2008, the progression of phases takes on a more familiar, if not comforting pattern.
Asset Manager Transaction Review – Deal Activity Slows, but Headline Transactions Lead the Way
Transaction activity in the asset manager sector in the first half of 2014 slipped behind last year’s strong pace, though a handful of large deals pushed overall deal value higher than in recent periods.
The Rising Tide - 2013 M&A Activity in the Asset Management Industry
The optimism shared by investors and managers alike coming into 2013 proved to be well-founded by the year’s end. The rising tide lifted all boats, as deal making, IPO activity, and follow-on equity offerings across the asset management industry all posted strong showings in 2013.
Tapering Everywhere
By Robert B. Albertson, Principal - While the supply of new Treasury debt is declining with the deficit, giving the Fed a helpful window to taper QE, foreign demand has already tapered more. The overall slack in demand must be taken up by domestic institutional and retail buying, which would require a sharp change in sentiment.
Collins Amendment Carve Out - Volcker Rule Relief for Investments in Bank TruPS CDOs
In response to industry pressure after the release of Volcker Rule requirements, U.S. regulatory agencies have offered an interim final rule, the Collins Amendment Carve Out, that would permit banking entities to retain investments in collateralized debt obligations (CDOs) consisting of Qualifying Trust Preferred Securities Collateral.
The Volcker Rule’s Impact on Regional and Community Banks
by Thomas W. Killian, Principal - The Volcker Rule restricts U.S. banks from investing in funds with collateral comprised of less than 100% loans that are not registered with the SEC and from engaging in hedging activities that do not hedge a specific identified risk. We examine the rule's impact and outline changes in bank investment and hedging strategies.
Another Housing Bubble
by Robert B. Albertson, Principal - Home prices have once again advanced considerably faster than incomes, and have broken out of their historical band. QE has undeniably kept mortgage rates below where they would normally be. Tapering or withdrawal of QE would almost certainly cause home prices to fall again.
Asset Manager Transaction Review - Deal Activity Ramps Up in Third Quarter
Transaction activity in the asset management sector in the third quarter of 2013 climbed back to recent norms, as 44 deals were announced. The slowdown in deals in the second quarter appears to have been an aberration.
Impact of Final Basel III Capital Ratios on U.S. Banking Organizations
by Thomas W. Killian, Principal - The OCC, Fed, and the FDIC have issued reports that will go a long way toward finalizing how Basel III capital rules will apply to U.S. depositories. We summarize the rules and key changes from previous guidance on how U.S. agencies will apply Basel III rules to U.S. institutions and highlight significant changes in capital planning, M&A strategy, and investment strategy.
Asset Manager Transaction Review - Deal Activity Returns to Normalized Levels in Second Quarter of 2013
After two consecutive breakout quarters of robust transaction activity in the asset management sector, each with in excess of 40 deals announced, the pace decelerated in the second quarter of 2013 to more normalized levels.
Less is More
by Robert B. Albertson, Principal - A bank contemplating or structuring a sale is making two important decisions at the same time: its most important sell decision and its most important buy decision. A banking consolidation cycle is underway in which powerful earnings accretion can be realized when sellers do not push for the final dollar. Book dilution is still important, but no longer solely defines post-announcement stock price reaction. Earnings impact is gaining recognition and has been an effective counterbalance.
A Letter to Our Clients
Our Senior Managing Principals reflect on the firm’s 25th anniversary, deep client relationships and continued focus on financial companies.
Shifting Into Higher Gear - 2012 M&A Activity in the Asset Management Industry
Resurgent global equity markets delivered a measure of prosperity and a reason for optimism to investors and the asset managment sector in 2012. Both M&A and IPO activity saw modest progress in 2012.
Asset Manager Transaction Review - Improved Transaction Activity in 2012
Transaction volume among asset managers increased for the second consecutive year, reflecting improving stock markets globally, increased M&A activity among independently owned asset managers seeking to avoid anticipated tax hikes, and the continued unwinding of non-core businesses by larger financial institutions.
End of the Consumption Era
by Robert B. Albertson, Principal - We believe financials remain sufficiently disconnected from the economy to be overweighted as the world continues struggling to recover. Signs of life continue to become increasingly evident in business lending. A fiscal crisis has been narrowly avoided without addressing fundamental problems. U.S. consumer spending faltered and remains weak despite short burst of promise.
Sandler O'Neill Comment Letter on on Basel III bank capital rules jointly proposed by the OCC, FRB, and FDIC
Sandler O'Neill comprehensively states the firm’s position on the historic bank capital regulations now under consideration. Divided into 11 distinct topics, Sandler O'Neill seeks to contribute constructively to a rulemaking process that enhances the safety and soundness of U.S. banks without sacrificing their efficiency and competitiveness or damaging the U.S. financial system.
Sandler O'Neill Comment Letter on the Basel III inclusion in regulatory capital of unrealized gains and losses on AFS securities
We urge the federal agencies to to reject the Basel III inclusion in regulatory capital of unrealized gains and losses on AFS securities. The flawed underlying accounting treatment does not reflect the banking business model and the proposed application to the capital accounts of banks would be unsafe and unsound for banks and detrimental to investors in banks.
Scale Increasingly Matters (Why Consolidation is Destiny)
by Robert B. Albertson, Principal - The negative narrative on banking, that it is doomed to being a moribund utility sector, burdened by regulation and hefty levels of capital, does not fit the data. Rather, recent quarterly data reveals a remarkable recovery in profitability despite record levels of capital.
The Right Rubicon
by Robert B. Albertson, Principal - the latest Euro resolution plan is much more likely to resolve the short-term uncertainties by making it clear to bank depositors and creditors that the full faith and credit of the European Monetary Union is behind its banking system and greatly limits the call on hard cash support that could mushroom into socializing private debt onto public balance sheets.
U.S. Basel III Capital Rules - Broad Application with Substantial Increase in Complexity and Required Capital
by Thomas W. Killian, Principal - Banks will face several new challenges when the Basel III capital standards become U.S. regulations as perscribed by the Fed's Notice of Proposed Rulemaking. Many speculated that the rules would only affect large banks, but the Fed is applying them to all insured depository institutions, savings and loan holding companies, and all bank holding companies with $500 million or more in assets.
Asset Manager M&A Quarterly Review - M&A Growth Expected Due to Improving Market Conditions
M&A activity in the first quarter of 2012 remained consistent with the fourth quarter of 2011. In total, 34 transactions were announced during the quarter versus 33 in the fourth quarter of 2011.
No One Fails (Really)
by Robert B. Albertson, Principal - The Comprehensive Capital Analysis and Review (CCAR) is a furthrer vindication of U.S. banking sector balance sheet integrity. It removes a layer of regulatory uncertainty and should enhance sector confidence, valuations and impetus to consolidation.
Deja Vu All Over Again - 2011 M&A Activity in the Asset Management Industry
Amid market volatility, M&A activity was relatively flat in 2011, with deal values up 7% from 2010 and deal volume down 5%. Organic growth was scarce among the publicly traded asset managers, causing multiples to compress in announced deals. Many prospective sellers spent the majority of the year focusing on client retention amid the market volatility.
The Great Credit Redistribution
by Robert B. Albertson, Principal - Our conviction on financial stocks continues to improve. Financial stocks have become proxies for global uncertainties rather than sector fundamentals. But remaining losses are mostly embedded in reserves and investor expectations, and bank loan growth appears promising.
Asset Manager M&A Quarterly Review: Continued M&A Growth Expected to Resume After 3Q Slowdown
M&A volume to stem from divestitures and sales of independently owned asset managers
GQ China: Sandler O'Neill 10 Years After September 11, 2001
The Chinese edition of GQ details the rebuilding of Sandler O'Neill as well as the steps forward made by employees and families in the decade since 9/11.
America's Economic Aneurysms?
by Robert B. Albertson, Principal - We have been very suspicious of the domestic U.S. economic recovery, doubting the sustainability of consumer spending and expecting a significant correction higher in Treasury bond rates. Why short-term indicators have pointed in the opposite direction for both.
Double Bubble
by Robert B. Albertson, Principal - U.S. monetary policy is not only confronting a daunting liquidity trap, it is also driving U.S. indebtedness into a global box canyon, almost certainly marrying a declining U.S. dollar to higher long-term interest rates.
Basel III and Its Implications: A Closer Look
Assessing the impact on the U.S. banking industry of the Basel Committee’s global capital standards announced on September 12th as originally introduced in December 2009 and later amended – highlights four near term and four long term implications.
Safe Haven China
by Robert. B Albertson, Principal - China has simply built a better balance sheet than most industrialized economies and its equities are looking far more appealing than US or European alternatives.
Government's Supporting Role
by Robert B. Albertson, Principal - The amount of government support in personal income has surpassed all records, raising serious concerns about the sustainability of consumer spending.
Letter to Basel Committee on Banking Supervision
The policies outlined in the Basel Committee’s Consultative Documents would significantly deleverage the banking system, dramatically reduce industry profitability, exacerbate balance sheet and earnings volatility and undermine capital formation.