Polar Capital Global Financials Trust Plc GBP · LSE:PCFT
Polar Capital Global Financials Trust Plc GBP — Polar Capital Global Financials Trust — Shareholder Meeting (April 2016)
21 slides from Polar Capital Global Financials Trust Plc GBP's shareholder meeting presentation, Apr 18, 2016
Slide 1: Polar Capital Global Financials Trust (PCFT) AGM Presentation
Polar Capital Global Financials Trust (PCFT) April 2016 AGM Presentation Nick Brind & John Yakas This presentation is for one-on-one use with non-US professional investors only www.polarcapital.co.uk For non-US professional investor use only. Please refer to the Important Information at the end of t
Slide 2: Award-winning Financial Team
Award-winning Financial Team Financials are the largest sector at 20.4% of the MSCI World Index • 19+ year track record of running financial sector funds (approx. $1bn under management) • Strong and stable investment team (4 fund managers, 2 analysts, 1 senior adviser) • Excellent long-term track re
Slide 3: Polar Capital Global Financials Trust (PCFT)
Polar Capital Global Financials Trust (PCFT) • Launched 1 July 2013 with fixed life to May 2020 • Issued 153m ordinary shares and 30.6m subscription shares • The Trust then issued a further 24.2m ordinary shares post launch • Met target dividend of 3.1p for financial year ended November 2014 • Divid
Slide 4: Discount Largely Unchanged Over Last Year
Discount Largely Unchanged Over Last Year Driven by sentiment and performance • Narrowed in middle of 2015 • Since widened as sector underperformed • Selectively bought back shares • Fixed wind up date in May 2020 1. Source: Bloomberg, as at 18 April 2016. Past performance is not indicative or a gua
Slide 5: Incumbents – Capital Significantly Stronger
Incumbents – Capital Significantly Stronger More capital reduces risk • New regulatory environment close to completion • Capital ratios continue to rise • Some tweaking of regulations European Bank Tier 1 & Equity/Assets1 US banks equity/assets ratio2 16% 14% 12% 10% 8% 6% 4% 2% 0% 2007 2008 2009 20
Slide 6: Incumbents – Capital Return Is Considerable
Incumbents – Capital Return Is Considerable Little loan growth means banks returning cash • Third-highest yielding sector • Payout ratios rising • Other high yielding sectors under pressure • Further restructuring ahead Capital return expectations1 Europe – Aggregate dividend distribution (€m)2 7.0%
Slide 7: Macro Support – Rising US Rates
Macro Support – Rising US Rates • Much less exposed to wholesale funding • High proportion of non-interest bearing deposits • Positive expectations reduced • Flattening yield curve is a worry • But now market overly negative Net interest spread and impact of non-interest bearing funds (NIBF) 1 US ba
Slide 8: Exposure To Oil And Gas Sectors Is Low
Exposure To Oil And Gas Sectors Is Low Undermined sentiment • Texan banks most exposed and seeing deterioration • Type of exposure is material • Derivatives exposure • Large banks will raise provisions impacting quarterly earnings but not capital Exposures to oil and gas/commodity sectors is not hig
Slide 9: Costs Of Litigation And Fines Falling Sharply
Costs Of Litigation And Fines Falling Sharply Mortgage misselling, LIBOR, FX, London whale, PPI etc. • Between 2010 and 2014 banks have paid out in excess of US$300bn • PPI has cost UK banks over £25bn in payment and provisions • Bank of America has paid out or put aside over US$90bn • Estimated ove
Slide 10: Potential To Cut Costs
Potential To Cut Costs “Our busiest branch in 2014 was the 7.01 from Reading to Paddington”1 • Move to online and mobile banking • Expect branches to be cut • 7% cut in cost/income opportunity Per-transaction costs by banking channel2 Customers are using different channels3 More customers are using
Slide 11: Challengers – Highly Profitable
Challengers – Highly Profitable Small, very profitable, growing with no legacy issues • Focus on niches provides high returns • Lack of competition provides cyclical advantage • Strong capital positions to fund growth • Funding infrastructure is key weakness • Recent regulatory pressures (UK) UK lar
Slide 12: European Banks Valuations
European Banks Valuations • Significant fall in valuation • Similar to previous crises • Italian NPL concerns • Oil and gas exposure • Lower interest rates Banks’ P/E relative to market Banks’ relative to market P/BV Source: Berenberg estimates, Bloomberg as at 22 January 2016. Past performance is n
Slide 13: Global Financials Trust
Global Financials Trust Sector exposure Top 15 holdings JPMorgan 3.3% Banks 53.7% Chubb 2.9% Wells Fargo 2.9% Diversified Financials 14.8% ING Groep 2.7% Insurance 13.4% Sampo 2.2% Fixed Income 9.5% Bank of America 2.0% Real Estate 5.5% UBS Group 2.0% 1 BNP Paribas 2.0% Cash 3.1% Swedbank 2.0% Sumit
Slide 14: Key US Large-Cap Portfolio Holdings
Key US Large-Cap Portfolio Holdings JPMorgan (US) Wells Fargo (US – National) • Market-leading positions in all four of its • Super-regional/national player divisions • Well-regarded management team • Resolved majority of high profile litigation • Highly-profitable franchise • Attractive valuation c
Slide 15: Key European Portfolio Holdings
Key European Portfolio Holdings ING (Netherlands) Banca Sistema • Improving profitability at ING Bank • Niche speciality finance • Restructuring momentum • Attractive profitability with low risk obligor • Significant capital return potential • Long-term growth potential (underpenetration, structural
Slide 16: Key Portfolio Holdings – New Entrants
Key Portfolio Holdings – New Entrants One Savings Bank (UK) Shawbrook (UK) • Former Kent Reliance Building Society • Niche UK SME lender • Profitable franchise with few legacy issues • Highly profitable (23% ROE) with strong growth outlook • Good funding base • Branch-light strategy (40% C/I Target)
Slide 17: Portfolio Holdings
Portfolio Holdings Chubb (US) Synchrony Financial (US) • Diversified property & casualty insurer • Largest private label credit card issuer in US • Compounded book value by 16% per annum • Private label card growth exceeds general since 2002 purpose card • Benefiting from rising insurance rates • Si
Slide 18: Key European Portfolio Holdings
Key European Portfolio Holdings UBS (Switzerland) Azimut (Italy) • Material progress on restructuring IB • Italian asset manager • Net inflow trends encouraging • Benefited from very strong new inflows • Significant capital return potential • Very profitable with potential for capital return • Valua
Slide 19: Summary
Summary Why Polar Capital? Why Financials? • Strong long-term track record • Recovery in developed markets • Depth of management team • Balance sheets much stronger • Strong regional/sector knowledge • Reinforcement of oligopolies • Excellent contacts with the industry • Capitalising on the insuranc
Slide 20: Important Information
Important Information Polar Capital 16 Palace Street London SW1E 9JD Important Information: This document is provided for the sole use of the intended recipient and is not a financial promotion it shall not and does not constitute an offer or solicitation of an offer to make an investment into any f
Slide 21: Important Information Cont.
Important Information Cont. Polar Capital 16 Palace Street London SW1E 9JD Regulatory Status: Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK FCA and is registered as an investment adviser with the US Securities & Exchange Commission (“S
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