EJF Investments Publish Shareholder Letter Commenting on Global Credit Markets and US Bank and Insurance Debt

EJF Investments Ltd. (LSE:EJFI), has published a letter to its
shareholders, outlining some of the key drivers behind the tightening
conditions witnessed in various credit markets, particularly the high
yield and leveraged loan markets. In particular, this letter outlines
how the debt of U.S. banks and insurance companies is far less
fundamentally impacted by these developments.

In its view, while high yield and leveraged loan markets are entering a
mature stage, some of the conditions driving this change such as
a higher rate environment, are directly beneficial to many banks and
insurance companies that EJFI is invested in. The full letter can be
accessed through EJFI’s website and the following link: https://www.ejfi.com/media/1212/hy-and-loan-market.pdf.

Key points and findings are outlined below:

• Smaller U.S. banks and insurance companies are benefiting from peak
  capitalisation levels and lower balance sheet leverage.
• Meanwhile, the quality of leveraged loan covenants has weakened since
  the global financial crisis, and standards of underwriting in these
  markets have fallen.
• Small US banks and insurers remain cautious with respect to asset
  quality, with little to no exposure to high yield or leveraged loans.
• While higher interest rates are placing stress on borrowers and CLO
  markets, this movement increases the profitability of banks and
  insurance companies.
• Consequently, current concerns surrounding certain debt instruments,
  especially high yield and leveraged loans, have
  minimal fundamental correlation to small and medium bank and insurance
  issuers.

Alongside publishing key data behind the recent drop in investor
sentiment in credit markets, EJFI have also outlined some of the core
reasoning behind their current strategy. This includes analysis of
credit quality across the banking industry, capitalisation levels in
smaller U.S. banks, and average non-performing asset ratios for
community banks.

About EJF Investments Ltd.

EJF Investments is a closed-ended investment company investing in assets
benefitting from regulatory and structural change in the financial
services sector.

The Company seeks to generate risk adjusted shareholder returns by
investing in a diversified portfolio of long-term, cash-flow generating
assets in two identified target investment areas, being (i)
securitzation and related investments and (ii) specialty finance
investments.

EJF Investments was the third highest performing investment trust in the
UK in 2018, according to research from AJ Bell.¹

View source version on businesswire.com: https://www.businesswire.com/news/home/20190110005085/en/