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Vontobel Asset Management Managing Director Peter Newell on the risks of investing in European banks.
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Have it all covered we start with Peter -- he is managing director with -- -- fund global asset management and we thank you for coming -- Peter.
David -- -- -- say that Euro banks freezing all Euro banks are on investor bull and insult right now.
While not saying they're all on adjustable or insolvent but either on a relative basis there's much better things to bond.
European banks are highly leveraged much more leverage -- US banks.
They have to raise capital they have to sell off assets at prices they bought them less than the prices they bought them.
And who are they going to lend to.
So you've got to slow growth in Europe.
We don't Citi growth in the banks we don't see any sustainable earnings over the next five years so we're looking in other areas to find investment opportunities for our client.
Look at the from your perspective see this is so this is a loaded word on investor -- but you know you may very well be right simply because.
The market flow of news he's so negative for these banks.
But I'm more interested in worried about any kind of systemic risk to our banks do you see that does that then make our financials on investor -- as well for the moment.
Well -- financials and the United States -- little more attractive and financial -- in Europe but still on a relative basis around the world you can find better names that have.
Real return on equity real return on assets injuring demand for products.
Five years of sustainable earnings growth -- a reasonable price so why banks and those stocks include British American Tobacco Novartis nationally etc.
That's correct a British American Tobacco in a market that's down on average about 14% to -- the stock is up 27% this year.
They have compound -- -- 15% per year high are away.
And a big footprint in emerging markets so there's -- during demand for the products and we see future growth.
You've got British American but let's talk about some other names that you feel even though they may have a footprint in Europe.
Can still.
Have lots of room to run here who works.
Well Novo Nordisk and -- Morris's largest producer of insulin on a worldwide basis unfortunately that is a growth industry.
-- -- about China.
10% of Chinese over the age of twenty have diabetes.
So as a diet changes and a worldwide basis and as I say unfortunately there's built in growth the company's compound of the 25% per year.
Over the last five years it's positive this year in a very very negative market.
And because of their global footprint their dominant market share.
They can weather the storm.
So you used the chocolate from Nestle's and you -- to cigarettes for tobacco.
-- of -- is -- gonna be Novartis after all their drugs after we take these other product.
Well that that's that's may be true -- you talks about wrestling -- Nestle's is just a great franchise they do business and over.
A 150 countries.
Countries and a worldwide basis that -- a 4% dividend.
Now it's only a 5% grower.
But if it's a 5% -- with a 4% dividend -- he doesn't change we can be the beneficiary of a 9% total return and in this environment that's pretty good surely.
-- been around long enough to to see all kinds of crises but this situation in Europe this is a little more worrisome to a lot of old timers.
Topic April but the people who watch these markets and these stocks for a long time because.
There is so little to be known it's uncharted territory whether one nation being kicked out of the Euro -- could be.
A disaster -- some experts say it could be disastrous do you feel that way if Greece were to somehow be jettisoned.
What would that do to the world markets.
Well I mean you can't unscramble the egg with the Euro but maybe a little bit -- -- can fall off the plate and that might be Greece.
But it's actually Charles go to became president of France 1959 said that how do you manage a country with three and 56 different cheeses.
Up up up up up up the heroes for the US the same predicament so how do you integrate a monetary policy in a fiscal policy was seventeen constituents.
Who all have different economic growth all have different debt levels and all have different ability to pay this debt levels that's the issue that has to be addressed.
Now they're making progress but they're nowhere near a resolution to those key questions.
Liz asked about the spillover into the US what about companies that are highly exposed over the US who would be avoided right now.
Eight highly exposed to Europe for well I think that a worldwide base if you look at emerging markets and you've got companies like Samsung Electronics 80% of the revenue comes in the United States and Europe.
Is that dependable in this environment when you've got very slow growth in Europe.
And little growth in the United States so those companies are to be avoided all all Europe the growth is going to be negative or going to be flat.
But you can find Europe multinationals.
-- international global footprint who can grow their franchises.
But not easy to find.
Peter -- -- thank you good thank you very action right SP here it is --
