Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Equity Bottom-Up

<ul><li>In the lead up to the Government's response to the Murray Inquiry, I&nbsp;pen an&nbsp;open letter to Mr Brian Hartzer,&nbsp;in which&nbsp;I draw attention to&nbsp;two puzzling aspects of the press release that accompanied last week's announcement of a $3.5 billion rights issue.&nbsp; The first&nbsp;is a myth commonly propagated by bankers; the notion that a bank must &lsquo;hold&rsquo; capital, the implication being that it sets capital aside that burns a hole in a bank&rsquo;s balance sheet while it sits idly in a vault.&nbsp; Second,&nbsp;was the decision to link&nbsp;the lift in&nbsp;its variable mortgage rates&nbsp;to APRA's more stringent capital requirements.&nbsp;</li><li>Despite the 50% increase in risk weights assigned to residential mortgages for Australian IRB banks from mid-2016, these banks will still have a considerable competitive advantage over non-IRB institutions.&nbsp; Further, it is highly unusual for a company to link price hikes to the need to use more loss absorbing capital in its liability mix.</li><li>Westpac&rsquo;s greater reliance on equity finance in its capital structure should lower its expected&nbsp;cost of equity&nbsp;by making the bank safer and more resilient.&nbsp; An analysis of large global banks confirms that&nbsp;those banks&nbsp;which are heavily dependent on equity finance tend to have lower volatility of stock returns.</li></ul>

In the lead up to the Government's response to the Murray Inquiry, I&nbsp;pen an&nbsp;open letter to Mr Brian Hartzer,&nbsp;in which&nbsp;I draw attention to&nbsp;two puzzling aspects of the press release that accompanied last week's announcement of a $3.5 billion rights issue.&nbsp; The first&nbsp;is a myth commonly propagated by bankers; the notion that a bank must &lsquo;hold&rsquo; capital, the implication being that it sets capital aside that burns a hole in a bank&rsquo;s balance sheet while it sits idly in a vault.&nbsp; Second,&nbsp;was the decision to link&nbsp;the lift in&nbsp;its variable mortgage rates&nbsp;to APRA's more stringent capital requirements.&nbsp;Despite the 50% increase in risk weights assigned to residential mortgages for Australian IRB banks from mid-2016, these banks will still have a considerable competitive advantage over non-IRB institutions.&nbsp; Further, it is highly unusual for a company to link price hikes to the need to use more loss absorbing capital in its liability mix.Westpac&rsquo;s greater reliance on equity finance in its capital structure should lower its expected&nbsp;cost of equity&nbsp;by making the bank safer and more resilient.&nbsp; An analysis of large global banks confirms that&nbsp;those banks&nbsp;which are heavily dependent on equity finance tend to have lower volatility of stock returns.

An open letter to the Westpac CEO - Dear Mr Hartzer, Please Explain

Westpac Banking

An open letter to the Westpac CEO - Dear Mr Hartzer, Please Explain