European banks benefit from consolidation and rates
The guest argued that European banks, specifically Bank of Ireland, have transitioned from depressed valuations to high-return businesses due to interest rate normalization and market consolidation.
The argument
In Ireland, strict post-crisis deleveraging and the exit of major competitors allowed remaining players to absorb assets and gain scale. Combined with rising interest rates, this structural shift drove Bank of Ireland's return on equity from 5% to the mid-to-high teens.
The thesis, stress-tested
✓ What validates it
- ✓Sustained mid-to-high teen ROE in upcoming earnings reports
- ✓Successful integration of acquired asset management and securities businesses
▸ Risks discussed
- ▸Regulatory creep and capital requirement increases
- ▸Potential for interest rates to decline again
Hear it yourself
"I just wanted to become an investor, although I had no idea what that meant. I had no idea what kind of investor I wanted to be or how to go about it, but it was the peak of the .com bubble. So needing a job and wanting to become an investor, I started interviewing, and I weaseled my way into an interview at Third Avenue. It was even then very difficult to get a buy side job for a recent undergraduate. And after going to the interview at 3rd Avenue, I went uptown to the apartment I was staying in at the time, my friend's apartment, his parents' apartment, and his father became aware of where I had been that day at the interview."
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