Gustavo Ballvé on January 3rd, 2013
Banks, Diversified financials, Food for thought, Home, Investment Themes, Portfolio Management, Risk management, Signal or Noise

Thought-provoking cover story (and I mean this in the “is it signal or noise?” realm) in The Atlantic: “What’s inside America’s banks?” To summarise the official story line, the article argues that a growing list of heavy-hitting investors are simply giving up on trying to understand banks’ balance sheets, thus considering big banks “uninvestable”. While the underlying issues are definitely interesting – the supposedly decreasing quality of disclosure versus increased requirements – I would venture two things: 1) that the out-of-favor status may actually increase the sector’s attractiveness to those who believe they can have an edge analysing banks; and 2) that even a mild search of these banks’ shareholder lists would yield many other “heavy hitters” that disagree with the article’s line.

The coincidence was Barron’s bullish article on Itaú Unibanco over the weekend. It doesn’t relate to the Atlantic’s piece at all, but there may be a point about Brazilian banks still being a world apart in terms of the simplicity of their business models.

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