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Efficacy and Safety of PF-07038124 in Patients With Atopic Dermatitis and Plaque Psoriasis: A Randomized Clinical Trial
Key Points Question Is topical PF-07038124 a safe and effective treatment for atopic dermatitis (AD) and plaque psoriasis? Findings This phase 2a randomized clinical trial of 104 patients, 70 with AD and 34 with plaque psoriasis, found that PF-07038124, 0.01%, administered once daily was more effective than vehicle after 6 weeks of treatment. Treatment with PF-07038124 was generally well tolerated, with no application site reactions.
Big U.S. Banks Have More Than $160bn In Excess Capital
The Fed has recently released the 2019 DFAST results. We have already published an article on this year's stress tests, highlighting banks that were the clear winners in this DFAST cycle. In this article, we are looking at how much excess capital the largest U.S. banks have.
U.S. Large-Cap Banks: 2019 Stress-Tests Released
On Friday, the Fed published the 2019 Dodd-Frank Act Stress Tests (DFAST). All the 18 banks have successfully passed the test. In this article, we focus on the DFAST results of the big-6 U.S. large-cap banks. As a recap, the 2019 DFAST severely adverse scenario featured a lower decline in asset prices compared to the 2018 DFAST due to unchanged UST yields and a flatter yield curve.
Wells Fargo: 4% Dividend Plus 11% Buyback For Its 2019 CCAR
Wells Fargo (WFC) paid out almost 150% of its earnings within the CCAR 2018 cycle. The bank hiked its dividend by 10% and also announced a buyback plan of up to $24.5bn. Big 6-US banks: 2018 Dividend payout ratios Source: Bloomberg, Companies data For the 2019 CCAR, we expect the bank to increase its quarterly dividend from $0.45 to $0.49, while around $22bn should be returned to shareholders through buybacks.
Bank Of America: Expect A 30% Dividend Hike Following Its 2019 CCAR
Bank of America (BAC) disappointed investors with its 2018 CCAR release, in our view. Despite the strong 2018 DFAST results, which were one of the best among large-cap U.S. banks, a well-capitalized balance sheet, and a strong rise in earnings, Bank of America increased its dividend only by 25%, from a quarterly DPS of $0.12 to $0.15. We had expected a higher increase, especially given BAC’s low dividend payout ratio.
Goldman Sachs: 2019 CCAR Could Be A Catalyst
The Fed will publish the 2019 Dodd-Frank Act supervisory stress tests (DFAST) on June 21, and the results from the related Comprehensive Capital Analysis and Review (CCAR) will be released on June 27. As a reminder, last year the Fed issued a conditional non-objection to the capital distributions plans of Goldman Sachs (GS) as its SLRs (supplementary leverage ratio) were barely above the 3% regulatory minimum under the severely adverse scenario.
European Banks: Low Growth But Reasonable Valuations And Strong Capital Position
European banks have been a disappointment lately European banks (EUFN) have been one of the worst performing sectors both in Europe and globally over the past 12 months. As shown below, the iShares MSCI Europe Financials ETF has underperformed MSCI World, S&P500 and MSCI Eurozone by 16%, 20%, and 6% respectively. There was a rally in March-April due to better than expected 1Q results, however, it was short-lived.
Emerging Markets Would Benefit From A Weaker Dollar
2018 was a tough year for emerging markets. The appreciating dollar, higher US rates and financial crises in Turkey and Argentina put significant pressure on the region’s stocks. IShares MSCI Emerging Markets (EEM), which is one of the most popular EM ETFs, have declined by around 20% since the beginning of the year.
U.S. Banks: What To Expect In 2019
2018 was a very tough year for global banks. U.S Financials have been also hit badly during the recent sell-off. The market sentiment towards banking stocks has changed dramatically. As shown below, there has been the largest outflow from Financial Select Sector SPDR ETF (XLF) since 2008 lately.
U.S. Banks: Winners And Losers This CCAR Cycle
The Fed released the 2018 Comprehensive Capital Analysis and Review (CCAR) results for 35 banks. The regulator did object to the capital plan of Deutsche Bank’s (DB) U.S. unit due to qualitative concerns based on material weaknesses in capital planning. In addition, the Fed issued conditional non-objections to the capital distribution plans of Goldman Sachs (GS) and Morgan Stanley (MS). As a result, GS and MS will limit their capital returns to shareholders to the levels they paid in recent years.
U.S. Financials And Yield Curve: Don't Panic, But Remain Cautious
The Fed published the 2018 DFAST (Dodd-Frank Act Stress Test) results for 35 U.S. banks. The release underpins the fact that U.S. banking sector remains well-capitalized and that should ensure financial stability even in a severely adverse economic scenario. The 2018 CCAR (Comprehensive Capital Analysis and Review) results, which will be released on June 28, are most likely to show above-100% payout ratios for most U.S. banks.
Goldman Sachs: CCAR Is Likely To Disappoint
While the 2018 DFAST were a victory for most U.S. banks, Goldman Sachs (GS) has disappointed investors. The bank’s supplementary leverage ratio under severely adverse assumptions printed at 3.1%, barely above the 3% regulatory minimum. In addition, even though GS’s CET1 would bottom out at 5.6% in the severely adverse scenario, it is still the lowest ratio among the big-6 U.S. banks. As shown below, GS looks like a clear outlier in this peer group.
Citigroup: The Largest CCAR Payout Among Mega-Cap Banks
On Thursday, June 21, the Fed released the Dodd-Frank Act Stress Test (DFAST) results for 2018. The stress tests once again demonstrate that the U.S. banking sector still remains the strongest among the world’s top economies. To be fair, Goldman Sachs (GS) and Morgan Stanley (MS) have disappointed investors as their SLRs (Supplementary Leverage Ratio) were barely above the regulatory minimum. But, in this article, we will focus on Citigroup’s (C) DFAST.
Wells Fargo: Stress Tests Bode Well For Dividends And Buybacks
The Fed released the Dodd-Frank Act Stress Test (DFAST) for 2018. First off, it is worth mentioning that the Fed’s assumptions for this year’s DFAST are more severe than in 2017. As shown below, despite the fact that both the U.S. economy and the stock market have improved, this year’s assumptions are indeed quite harsh. For comparison, the table below shows key assumptions for the 2017 DFAST. We see Wells Fargo (WFC) as a clear winner following the DFAST 2018 release.
Bank Of America Comprehensive Capital Analysis And Review: Expect A 75% Dividend Hike
The Fed will publish this year's CCAR (Comprehensive Capital Analysis and Review) results on Thursday, June 28. We expect Bank of America (BAC) to deliver the largest dividend increase among large-cap U.S. Banks. According to our estimates, BAC will increase its quarterly dividend from $0.12 to $0.21. That would correspond to around 30% of FY 2017 earnings adjusted for non-cash items. In addition, we forecast a $19B buyback program. That would drive a total payout ratio to around 100%.
JPMorgan: 3.2% Dividend Plus 6.5% Buyback For 2018 CCAR
The Fed will release this year’s CCAR (Comprehensive Capital Analysis and Review) results on Thursday, June 28 at 4:30 p.m. We believe the 2018 CCAR should be a big catalyst for U.S. banks, especially for large-cap ones. While almost all lenders are most likely to increase capital returns to shareholders, we expect JPMorgan’s (JPM) total payout ratio, which includes both dividends and buybacks, to be more than 100%. According to our estimates, the bank’s dividend yield for FY2018 will reach 3.2%.
Growth Stock With A 5.3% Dividend
HSBC (HSBC) has been one of the best performing European banks since the beginning of the year. Although the bank generates a majority of its revenues from Asia, it still has the largest weight in the European Financials ETF (EUFN). Thanks to its significant presence in Hong Kong and other Asian countries, HSBC has been much more resilient to the Brexit challenges, a slowdown in the European economy, falling German bond yields, and a more dovish ECB stance.
New York Community Bancorp: Forget SIFI Limit - It Is All About Funding
New York Community Bancorp (NYCB) has been one of the worst performing US regional banks over the past 12 months. As shown below, it has underperformed the US Regional Banks Index (KRE) by more than 30%. Given the recent underperformance and the bank’s attractive dividend yield, NYCB remains a hotly debated stock. In February, we published an article on NYCB, arguing that the worst is yet to come for the bank.
Itau: Examining The Worst-Case Scenario
Since the beginning of the year, South American stock markets have been under severe pressure due to rising US interest rates, a stronger USD, and tightening liquidity conditions. Unsurprisingly, investor sentiment towards these assets has changed dramatically. Brazil was not immune to those headwinds. In addition, the country’s economy has been hit hard by a string of general strikes. Truck drivers were protesting over higher diesel prices.
Royal Bank Of Canada: Boring Is Good
Royal Bank of Canada (RY) delivered another in-line quarter. Even though operating costs were a tad higher than expected and the bank’s CET1 ratio was down by 10bps q/q, we note that RBC’s core revenue trends remain stable. Although Toronto-Dominion Bank (TD) has a larger share of US revenues, we note that RBC enjoys a higher sensitivity to US interest rates due to its subsidiary, City National Bank.
Toronto-Dominion Bank: Improved Cost Efficiency And Encouraging Revenue Outlook
Toronto-Dominion Bank (TD) reported operating EPS of $1.62 in the second quarter, well above consensus estimates. The beat was largely driven by improved operating efficiency as TD’s cost/income ratio decreased to 50.9% in Q218 from 51.8% in Q417 and 56.5% in Q217. To be fair, such a low opex growth rate is unsustainable in the near-term. Management has guided for 3-3.5% cost growth in 2018, implying that operating expenses should start rising at a higher pace in the second half of the year.
Bank Of Nova Scotia: Attractive Entry Point
Even though Bank of Nova Scotia (BNS) has outperformed most of global banking stocks since the beginning of the year, the stock has been hit by a number of headwinds. First off, as shown below, BNS has significant exposure to Latin America. As we have noted in our prior article, this is what differentiates the bank from its Canadian peers, and, in fact, there is enormous potential in under-penetrated Latin America’s banking markets.
Bancolombia: Deteriorating Fundamentals And Political Uncertainty Make Risk/Reward Unattractive
Bancolombia (CIB) is the largest bank in Colombia and a Top-10 bank in Latin America. Last November, we shared a bullish article on CIB. Our view was that the ‘post-Q317’ sell-off was unjustified as it was a classic kitchen-sink quarter. In addition, the stock was absurdly cheap trading at less than 8x forward earnings. Since then, the stock has had a good run.
Lloyds: It Is Always Darkest Before The Dawn
Lloyds (LYG) has delivered another solid set of results. The bank’s NIM once again improved in the first quarter, credit quality remains strong, while volume growth is solid, especially in consumer finance and SMEs. In addition, Lloyds maintains an impressive level of organic capital generation. Despite that, the market is still very bearish on Lloyds. All the positives are largely being ignored as Mr. Market continues to focus on the possibility of a hard Brexit.
8% Dividend Should Protect This Stock In A Bear Market
To be fair, Nordea (OTCPK:NRBAY) reported a disappointing set of numbers for the first quarter. The bank’s revenues missed the consensus estimate as both net interest income and fees were weaker than expected. With that being said, Mr. Market is too bearish on the stock. Even though Nordea has been hit hard by a double-whammy of temporary revenue headwinds and a massive restructuring program, its long-term fundamentals remain intact.
ING Offers Significant Value Trading At 9x Forward Earnings And 5% Dividend
ING (ING) and other major European banking stocks have been a major disappointment since the beginning of the year. We have been arguing for a quite while that ING stands out among other many other European lenders due to its high-quality business model, robust loan growth, resilient margins, impressive capital ratios, focus on digitalization and a progressive dividend policy.
Fifth Third Bancorp-MB Financial Merger Marks A New Era For U.S. Banks
On May 21th, Fifth Third Bancorp (NASDAQ:FITB) announced a merger with MB Financial (NASDAQ:MBFI), a Chicago-based mid-sized bank. FITB will pay $4.7 billion, of which 90% will be in stock and the rest in cash. The deal is valued at a 2.8x P/B, which we view as a rich multiple. Fifth Third Bancorp and MB Financial, Inc. jointly announced today the signing of a definitive merger agreement under which MB Financial, Inc.
TCF Financial: M&A Target With Improving Fundamentals
TCF Financial (TCF) has recently released its financial results for the first quarter. The numbers were strong across the board and management raised FY18 guidance for several metrics. Despite a solid run, we still think that TCF looks attractive, especially given its outstanding revenue generation. Last November, TCF announced that it would discontinue all indirect auto loan originations.
Sterling Bancorp: Strong Fundamentals Underpin 40% Upside
Sterling Bancorp (STL), which remains one of our top-picks among U.S. regional banks, has recently reported its financial results for the first quarter. Although the headline EPS was slightly lower than the consensus had expected, the miss was driven by non-core charges and one-off items. Core operating trends remain solid, and management has improved guidance on several metrics. Sterling has plenty of catalysts and, importantly, the stock is still reasonably valued.
MetLife: Profitability Is Set To Improve
Since the beginning of the year, MetLife (MET) has been hit hard by a string of negative charges and a material reserve build-up. For starters, on the 2018 Outlook Call, management announced a review of practices and procedures used to estimate the company's reserves related to certain annuitants who have been unresponsive or missing over time. After completing the review, the company disclosed a material weakness in internal control and added more than $500mn to its annuity reserves.
Emerging Markets Are Likely To Rebound In The Near Term
In January, we published an article on the iShares MSCI Emerging Markets ETF (EEM) saying that: Our view was based on several factors. First, emerging markets were among the top-5 most crowded global trades based on long positions and client inflows. Second, short interest, a helpful sentiment indicator, was close to its historical minimum. That was another red flag, in particular for contrarian investors.
The Worst Might Be Over For Argentina
Argentinian assets (ARGT) have been hit hardly by a coincidence of several market developments. First, emerging markets have been under pressure since the beginning of the year due to U.S - China trade tensions, a slowdown in eurozone economic activity and lower-than-expected global growth. The chart below plots the JPM EM Currency Index. Second, rising yields on the US Treasury notes are another headwind for emerging markets.
American Express Is Firing On All Cylinders
American Express (AXP) delivered a very strong set of numbers for the first quarter. The company comfortably beat consensus estimates for both earnings and revenues, and, more importantly, produced double-digit growth in its key operating metrics. AXP’s billed business growth has accelerated to 10% y/y, mainly driven by U.S Consumer and Global Commercial segments. According to the company, last quarter, AmEx acquired the portion of the Hilton portfolio that it did not already own.
Buy This Oversold Blue-Chip Bank With A 5.4% Dividend
On April 4th, Bloomberg reported that HSBC (HSBC) is considering an exit or sale from smaller consumer operations such as Bermuda, Malta and Uruguay. In addition, the bank plans to expand its asset management division and is currently looking at a potential merger with a rival. In our view, the news confirms that the group’s management will remain committed to transforming HSBC into a more focused and more efficient banking institution.
U.S. Banks: What Matters Most Ahead Of Q1 Earnings Season
The first-quarter earnings season for large-cap US Financials (XLF) kicks off on April 12. We expect U.S. banks and financial companies to report a strong Q1. Despite global trade tensions and recent tariff announcements by both the US and China, US economic data continues to beat expectations. The chart below plots the Citi Economic Surprise Index for the United States (the white line) and the global economy (the orange line).
Mall REITs: Bond Proxies Trading At Depressed Valuations
Note: This is an excerpt from a report that was originally published for Banking on Financials subscribers Mall REITs caught our attention at the beginning of the year. These stocks have been out of favor for quite a while now, largely due to the so-called Amazon (AMZN) factor and deteriorating fundamentals. As shown below, the Bloomberg Regional Mall Index, which is a market-cap weighted index of eight regional mall REITs, is trading near its six-year low.
BBVA Banco Frances: This Ugly Duckling Is Transforming Into A Beautiful Swan
As our regular readers know, we have been covering Argentinian banks for quite a while now. Our bullish stance on Banco Macro (BMA) and Grupo Galicia (GGAL) has been largely driven by the fact that credit penetration in Argentina, measured as total banking loans against the country's GDP, remains one the lowest in the world, suggesting that the sector will continue to deliver healthy growth.
Credit Suisse: Is This Restructuring Story Still A Buy?
When we last wrote on Credit Suisse (CS), we thought that the stock presented a speculative buying opportunity ahead of Q317 numbers. Our view was based on the fact that Credit Suisse was one of the main beneficiaries of improving trends at Credit, which, at the time, was the best-performing division within the FICC (Fixed Income, Currencies and Commodities).
European Banks: What To Do After The Recent Sell-Off
When we last wrote about European banks (EUFN), we said that a number of macroeconomic indicators suggested that a short-term correction in the European banking sector could be imminent. Citigroup’s Economic Surprise Index for the European economy was very weak in February, while Germany’s IFO Index, which is one of the most popular leading indicators for economic activity in Germany, unexpectedly declined.
U.S. Banks: Trade War Is A Risk But Don't Overlook The Positives
The United States has recently introduced tariffs on steel and aluminum. Additionally, last week the Trump administration announced its plans to impose a levy on up to $60B of Chinese goods. China has already responded to those measures, even though the Chinese government targets a much smaller amount of up to $3B of US imports. These actions have raised fears of a new trade war, which would hurt global economic growth.
Lloyds Could Double If U.K. Gilts Catch Up With U.S. Treasuries
Several bulge-bracket investment banks have recently raised their earnings estimates on Lloyds (LYG). On March 8th, JPMorgan (JPM) resumed research coverage on Lloyds saying that the stock is its top pick in the UK. UBS (UBS) has reiterated that Lloyds is among its top-picks in the European banking space, raising its target on the stock to GBp87. Finally, Barclays (BCS) initiated coverage on UK banks with a strong preference for Lloyds.
Prudential Financial: Strong Operating Trends, Higher Dividends, Attractive Risk/Reward
When we last wrote on Prudential Financial (PRU), we thought that the stock was offering a very attractive risk/reward ratio. Importantly, in our view, there was a margin of safety, given that PRU was trading at a single-digit P/E ratio. The stock reached $126 per share at the beginning of the year, and, after that, PRU dropped by almost 20%. We received a lot of questions on Prudential Financial from SA readers. Many of them were surprised by such a notable decline.
Based On ROA, Banco Macro Is The World's Most Profitable Bank
Although Banco Macro (BMA) has risen by 21% since we last wrote on the company, the stock has been on a roller-coaster journey over the past 12 months. Last October, Banco Macro was trading at $135 per ADR. However, in November 2017, its major shareholder and chairman, Jorge Horacio Brito, was accused of corruption. According to media reports, Mr. Brito is allegedly linked to the so-called Ciccone case.
Banco Do Brasil: A Restructuring Story Trading At 8x Forward Earnings
A little less than year ago, we published a bullish article on Banco do Brasil (OTCPK:BDORY). Since then, the stock has had a good run. In addition, Banco do Brasil has recently upgraded its long-term guidance on key operating metrics. As such, we think it is important to provide an update on the company, especially given that Banco do Brasil remains one of the cheapest stocks in the global banking space.
The Crapo Bill Would Be A Catalyst For U.S. Regional Banks
On March 5th, Mike Crapo, the Chairman of the Senate Banking Committee, officially published The Economic Growth, Regulatory Relief, and Consumer Protection Act (the S.2155 bill). The so-called Crapo bill is a complex document, but its key goal is to provide some regulatory relief for regional banks and smaller community banks. For instance, the bill would increase the $50B threshold for the SIFI (systemically important financial institutions) status.
Itau: Growth Stock With A 5.3% Dividend
South American banks have been traditionally viewed as growth stocks. That should come as no surprise, given that credit penetration in the region, measured as total banking loans against GDP, is still very low compared to developed countries. As shown below, Latin America has a loans/GDP ratio of just 44%. For comparison, developed markets have a credit penetration ratio of 150-250%.
Bancolombia: Time To Take Some Profits
Bancolombia (CIB) has recently disclosed its financial results for the fourth quarter. Although there were a number of positive non-core items, including a one-time tax refund of COP86B, the bottom line was broadly in line with expectations. The bank’s net interest margin did surprise positively. The NIM was up by 14bps q/q. Despite a falling interest rate environment, CIB’s loan yields were stable on a quarterly basis, while its funding costs decreased by 10bps q/q.
HSBC Is Returning To Growth
Note: This is an excerpt from a report that was originally published for Banking on Financials subscribers on February 27th. HSBC (HSBC) has recently published its financial results for the fourth quarter. Adjusting for non-core items and one-offs, the numbers were largely in line with expectations. However, HSBC announced that it had deferred a share buyback. We believe that was the reason why the market reacted so negatively to the results as the stock fell by more than 3.5% on the day.
JPMorgan Raises Its Shareholder Yield To 8%
Note: This is an excerpt from a report that was originally published for Banking on Financials subscribers on February 28th. JPMorgan (JPM) has recently hosted its investor day. The bank increased its medium-term targets for key operating metrics. As a result, JPMorgan now expects its pre-tax income to reach $44-$47B in the medium-term. For comparison, as shown below, the consensus currently has much lower estimates. As such, the investor day is most likely to trigger significant earnings revisions.
Deutsche Bank: A Buying Opportunity Arises
Note: This is an excerpt from a report that was originally published for Banking on Financials subscribers on March 2nd. Since we became an SA contributor, we have written a lot on Deutsche Bank (DB). Our recommendation has been the same for quite a while now - despite its low valuation multiples, it is best to avoid Deutsche due to multiple structural and cyclical headwinds. The stock was not a safe short either.
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