PCC – Primary Capital Certificates
PCCs are very similar to shares. The main differences between PCCs and shares are that PCCs give ownership rights to specific parts of a bank´s capital, and that the governing bodies of a savings bank will have a broader representation than a commercial bank. As a result of the fact that the PCC owner´s only own parts of the bank, the dividends are limited.
There are 121 savings banks in Norway. 25 of these have issued PCC. In 2002 The Savings Bank´s Act was amended. The savings banks got the possibility to convert to shareholding companies, and the largest saving bank, Union Bank of Norway, converted. The bank has later on merged with the largest commercial bank in Norway, DnB, into DnB NOR Bank ASA. The bank might still be named a savings bank.
PCCs are of great importance for the Norwegians savings banks. 8 of the 10 largest savings banks have issued PCC, and the he owners´ share of the bank´s capital varies from about 10 to 55 percent.
The interesting thing about PCCs in a few of the mid-sized norwegian banks is
- High dividend yield (comparable to dividend shares)
- Low volatility
At the same time the disadvantage from an investor’s perspective is
- Low volatility
- Low liquidity
As should be easily noticable, low volatility is listed as both a pro and con . While the Oslo Stock Exchange Benchmark Index (OSEBX) is up 30% the past month (and rougly 45% since the bottoming) a few of the more interesting PCCs (such as MORG – Sparebanken Møre) has moved 1.9% the past month. As such, a high weight on PCCs vs the overall market means giving up gains. At the same time, in downturns they stay stable while giving a good dividend.
As such having a weight on PCCs serves as a defensive position, and at the current levels seems interesting to position for a pullback.
The most interesting PCCs in my opinion at the moment?
- MORG – Sparebanken Møre
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Dividend history:
- SVEG – Sparebanken Vest
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Dividend history:
- MING – Sparebanken MidtNorge
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Dividend history:
May 10th, 2009 at 18:45
[...] Kristian Fiskerstrand’s blog « PCC – Primary Capital Certificates [...]
May 18th, 2009 at 14:27
[...] We revert back to the initial strategy from the 10th of may. Positioning ourselves defensively in primary capital certificates and focusing on stockpicking. Things can obviously continue upwards, however, I’m comfortable [...]