Polar Capital Global Financials Trust has published results for the 12 months ended 30 November 2024. It was a great year for the sector. In NAV terms, the trust just failed to keep pace with its MSCI ACWI Financials Index benchmark, returning 34.8% to the index’s 36.1%. However, a narrowing discount (from 12.2% to 5.5%) meant that the return to shareholders was 45.4% – the best in the trust’s history.
Longer term investment performance remains ahead of the benchmark with NAV total return measured from the company’s reconstruction in April 2020 to the year ending 30 November 2024 at 129.9% versus the benchmark of 128.1%. The share price total return for the same period was 128.3%.
The revenue earnings per share rose from 4.97p to 5.31p and from that the trust intends to pay full year dividends of 4.7p, up 3.3% on the prior year.
The board is proposing the adoption of an “enhanced dividend” policy under which it will aim to pay, in the absence of unforeseen circumstances, a regular dividend equivalent to approximately 4% of the Company’s NAV in a given year. It is proposed that dividends will be paid quarterly at a level of 1% of the company’s NAV, calculated on the last business day of each prior financial quarter.
5,642,322 shares, equivalent to 1.7% of the shares in issue at the start of the period, were bought back at an average discount of 8.9%. These buybacks added 0.26p to the NAV. To give it more flexibility on this front, the trust will seek to cancel its share premium account – votes to permit this will be put forward at the AGM.
As planned, the trust intends to conduct a tender offer for up to 100% of its shares this year (and at five-yearly intervals thereafter). Details will be announced soon.
[We have explained in recent notes and articles why the financials sector may have much further yet to run. I really like the period exit opportunity structure adopted by this trust. It gives the manager a long enough period of fixed capital to enable it to focus on the job of making money and it gives investors the certainty of an exit at NAV should they desire it – which should help keep the discount narrower in the meantime. It can also give an entry point to an investor who wants to commit a large amount of money to the strategy in one go – there is no reason why the trust should not expand rather than shrink later this year.]
Extracts from the manager’s report
At the single stock level, holdings in Interactive Brokers Group a US retail broker, Rakuten Bank a Japanese bank, and Barclays were the largest single contributors to performance. The first was a beneficiary of interest rates not being cut as had been expected and a continued increase in retail trading. Rakuten benefited from the higher outlook for interest rates in Japan, while Barclays rallied from depressed levels as it benefited from higher earnings expectations in both its retail and investment banking arms.
The largest individual detractors were Sabre Insurance Group, a UK motor insurer, BFF Bank, an Italian bank, and Wells Fargo, a US bank. Sabre is one of the smallest UK motor insurers but one of the most profitable due to its focus on underwriting higher risk drivers. However, increased competition led to a fall in customers, and this weighed on its share price. A holding in BFF Bank was bought following a sharp fall in its share price on the back of an intervention from the Bank of Italy but lack of clarity on a resolution led to its shares treading water. The decision to sell Wells Fargo was a relative drag as the stock continued to perform well on the expectation that the incoming Trump administration would lift restrictions on the bank, first imposed back in 2015.
PCFT : Polar Capital Global Financials shareholders rewarded with best year ever
