2017 Sohn Investment Conference

Transcription

1 2017 Sohn Investment Conference May 2017

2 The Divided Kingdom: A Broken Growth Model Dependent on imports: ½ of UK exports go to the EU vs 15% EU exports to UK; ½ of energy and food are imported Weak public finances: Fiscal deficit: -2.8% of GDP; Public debt: 89% of GDP High household leverage: to be 146% of income in 2017 Stagnant productivity: UK productivity level is 17pp below the G7 average Growing social imbalances: top 1% pay 27% of tax You are over-invested UK: 4.5% of global FX reserves in vs 3.5% of world GDP > We estimate Brexit will cost 140bn or 7.5% GDP Key Take Away - Short Gilts 10-year Gilt yield is > 200bp below 10-year inflation expectations Source: Algebris (UK) Limited, OBR, IMF, ONS, OECD, UK Gov 2

3 High Asset Prices but Low Productivity ( 000) Asset-rich, Wage-poor Average Earnings vs Reserve requirement abolished in the UK Right to buy introduced under Thatcher UK entry into the EU House prices Help to Buy introduced Big Bang % 60% 50% 40% 30% 20% 10% 0% Anglo-American Bias? World s 50 largest asset managers and 15 largest SWFs US FR UK JP % AUM % World GDP CN DE NL RoW Note: ; Source: Algebris (UK) Limited, ONS, New Economics Foundation Source: Algebris (UK) Limited, IPE, SWIF, IMF 3

4 Are Italian Bad Loans Still An Issue? NPE* Outstanding vs Sales ( bn) Bad Loans Unlikely to pay Other past-due Sales Levels have stabilised Sales are picking up: 2015: 19bn 2016: 33bn 2017E: 59bn or 2x2016 and 3x2015 Banks have raised ~ 37bn** of capital *NPE: Non Performing Exposures. **Including capital provided by Atlante and by the Republic of Italy. Source: PWC Report The Italian NPL market June 2016, ABI Monthly Outlook, Algebris Investments (UK) LLP, March

5 UniCredit: A New Beginning Pillar 1: CET1 Pillar 2: NPLs Improved Profitability: CIR ROTE 12.5% Capital Inc. + Asset Sales Sold: 17.7bn 2015: 62% 2019 >9.0% P/TBV? 2016: 7.5% 19.5bn 2019: <52% 2015: 4.0% Now: 0.6x New CEO Mustier: focused, achiever Note: 2019 data reflects company s targets. Source: Algebris (UK) Limited, Unicredit. 5

6 AT1: Ample Headroom for Coupons Payments 2017 MDA Headroom 5.2% 41bn 4.1% 14bn 3.8% 15bn 3.4% 22bn 3.3% 19bn 2017 MDA Threshold 8.4% 7.8% 8.4% 8.2% 9.3% 2016 Pre- Prov. Profits Worst Reported Annual Loss HSBA LN GLE FP BBVA SM 8bn 8bn 12bn 14bn 23bn 0bn 0bn 0bn 0bn 0bn BNP FP SAN SM Notes: MDA Maximum Distributable Amount (as per 2017 SREP framework), expressed as % of Risk Weighted Assets. MDA threshold/headroom are estimates Source: Algebris (UK) Limited, Companies Reporting, April

7 Banks Safely Passing Stress Tests ECB 2016 Stress Test GDP Inflation Stocks CRE 7.1% 5.8% 53% 23% 2016 CCAR & DFAST Real Unempl. GDP Rate 7.5% to 10% Dow House Jones Prices 51% 25% CET1 CET1 12.6% 3.4% 9.2% Drawdown Fail Mark 5.5% 12.3% 3.9% 5.2% 8.4% 7.1% Drawdown Fail Mark 4.5% 2015 Pre- Stress Post Stress 2015 Pre- Stress Post DFAST Post CCAR Source: FED, ECB, Algebris (UK) Limited 7

8 Disclaimer Offices London Algebris Investments (UK) LLP Algebris (UK) Limited 7 Clifford Street London W1S 2FT Singapore Algebris Investments (Asia) Pte LTD 50 Raffles Place #38-07 Singapore Land Tower Singapore Boston Algebris Investments US (Inc) 699 Boylston Street Suite #1001 Boston MA Milan Algebris Srl Via Fatebenefratelli Milano This document is issued by Algebris Investments (UK) LLP and Algebris (UK) Limited. Algebris Investments (UK) LLP and Algebris (UK) Limited are collectively referred to as Algebris. Both Algebris entities are authorised and regulated by the Financial Conduct Authority. This document is for private circulation only. The information contained in this document is strictly confidential and is only for the use of the person to whom it is sent. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Algebris. The information and opinions contained in this document are for background purposes only, do not purport to be full or complete and do not constitute investment advice. Algebris is not hereby arranging or agreeing to arrange any transaction in any investment whatsoever or otherwise undertaking any activity requiring authorisation under the Financial Services and Markets Act This document does not constitute or form part of any offer to issue or sell, or any solicitation of an offer to subscribe or purchase, any investment nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document by any of Algebris Investments (UK) LLP or Algebris (UK) Limited, their members, directors, employees or affiliates and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. This document is being communicated by Algebris only to persons to whom it may lawfully be issued under The Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 including persons who are authorised under the Financial Services and Markets Act 2000 of the United Kingdom (the Act ), certain persons having professional experience in matters relating to investments, high net worth companies, high net worth unincorporated associations and partnerships, trustees of high value trusts and persons who qualify as certified sophisticated investors. This document is exempt from the prohibition in Section 21 of the Act on the communication by persons not authorised under the Act of invitations or inducements to engage in investment activity on the ground that it is being issued only to such types of person. The distribution of this document may be restricted in certain jurisdictions. The above information is for general guidance only, and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Past performance is not necessarily a guide to future performance. The strategy employed may result in the NAV exhibiting a high level of volatility and so is suitable for professional investors only. Registered office: Algebris Investments (UK) LLP & Algebris (UK) Limited, 7 Clifford Street, London, W1S 2FT, UK. Company registration number: Algebris Investments (UK) LLP OC & Algebris (UK) Limited