Lloyds TSB Group PLC (LYG)

ING (ING-N) or Lloyds Bank (LYG-N)? For any of the European banks, if the euro continues to rise they may get pressure. With an improving economy, they may have to start raising interest rates. From a quality standpoint, ING would be much better, because this one still has the overhang of the British government, and what is going on with BREXIT. (See Top Picks.)

This was up 10% last year, which wasn't as great as a lot of the European banks. The biggest problem in Europe is that they have ultra low rates and are just starting to think about getting rid quantitative easing. Until interest rates and inflation start to rise in Europe, you are going to get stickiness out of European banks and their growth rates. This bank just started to initiate a dividend again, which they haven't paid for 6 years.

Had been in this, but exited 2-3 years ago. He was looking for several catalysts that didn't happen. Had thought they had a strong opportunity for cross selling, but none of the catalysts he was looking for were happening. Prefers US banks at this time.

The BREXIT effect will not have predictable impacts. He has heard news that May is looking to increase divorce payments. Until we know how BREXIT will turn out it is hard to say what it will do to the British economy. This one is trading relatively low to book value. It is starting to show enough discount to show the BREXIT risk. It is an interesting investment if you are up to the risk.

ING (ING-N) or LLOYDS (LYG-N)?This is predominantly a retail bank in the UK, and ING is predominantly a retail bank in the Netherlands. ING actually had to sell off a lot of businesses. Lloyds is a great business with a great return on equity, and trading well above BV, and is much more fully valued. ING is probably the stock to own over the next little while. They've taken a lot of costs out, and you should see a growth in earnings.

Hold this or buy a US bank instead?Had owned this, but owns US banks now. Because of BREXIT, there is no question that there is a certain amount of uncertainty. Thinks the EU is going to be very reluctant to allow the UK to get away with some favourable trade terms, as there may be an Italian political party that wants to separate also.

The overriding issue for them is that it is very much a UK centric story. In the context of a BREXIT, there is likely to be some downside on GDP growth for the UK economy, maybe 5% per year for 4 or 5 years until everything normalizes. Thereafter, there might be some growth. In the interim, you will likely see higher interest rates for banks, but you will see contracting earnings opportunities. You want to look at banks that have UK exposure, but also outside growth. He would suggest looking at HSBC Holdings (HSBC-N) or Banco Santander (SAN-N).

Over the past year, this has done quite well. They brought the dividend back and increased it. As a domestic UK bank, they are sticking to their knitting.

Most global banks have been freshly recapitalized. The challenge is that you may be able to get it cheaper. They are starting to enter serious negotiations of BREXIT. The last substantive discussions was when the British pound sold off substantially. Watch the stock and watch for some currency weakness for the pound relative to the Cdn$. If it drops, take a real close look at it. This is a UK Centric story, so you won’t necessarily get a lot of benefit from loan growth across continental Europe, and you might have dead money for 2 years. In any case, it is a good solid story and rising interest rates will help.

There are a couple of things to think about. First of all, you’ve got BREXIT risk. The pound took a nasty drop 3 or 4 months ago. From a Cdn$ point of view that would have been a great opportunity. Right now, the pound has strengthened quite a bit and he doesn’t see this bank as an opportunity.

Lloyds Bank (LYG-N) or ING Groep (ING-N)? Both did very well coming out of the chute from when they were partially nationalized by the British government. Management made this one more retail oriented and got rid of non-core businesses. This is probably a little more expensive than ING.

Lloyds (LYG-N) or ING (ING-N)? He would favour ING, the Dutch insurer, over Lloyds. In the UK, Lloyds has had a big restructuring coming out of the financial crisis, and clearly that is now behind it. The problem is the political and economic uncertainty background in the UK.

He has no exposure to the UK banks. This one has excellent management, but he is concerned with the uncertainty with BREXIT. He would prefer to stay away from UK banks. BREXIT could be ugly for the UK. He can find banks elsewhere to own.

Primarily a retail bank in the UK. Sold off a lot of non-core assets. There are 2 things holding back the stock. The UK owns a position, and have to sell it off. Also, the stock ran up a lot and was well ahead of itself, so has pulled back. A great business and a great company and incredibly well run.

The government has just about sold its stake in this equity. The underlying business was strong when the stock got wiped out. Now that the government has got rid of its stake, it is doing pretty well. The underlying business is doing quite well. You might see some devaluation of the currency, however.