Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

<ul>
<li>We screen 35 GEM Banks in this report with its accompanying charts, and identify the following names as investment opportunities</li>
<li>In LatAm, we highlight <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a> , <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MF)</a> and <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a> </li>
<li>In Asia, our preferred stocks are <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a> , <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> , <a href="https://www.smartkarma.com/entities/hana-financial-group" target="_blank" data-smartkarma-citation="entities:12843:1" rel="noopener">Hana Financial (086790 KS)</a> and <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank Of India (SBIN IN)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/commercial-international-bank" target="_blank" data-smartkarma-citation="entities:27625:1" rel="noopener">Commercial International Bank (COMI EY)</a> and <a href="https://www.smartkarma.com/entities/sberbank-of-russia-pjsc-cde59529-fb78-4659-85d0-127942b44ba7" target="_blank" data-smartkarma-citation="entities:27581:1" rel="noopener">Sberbank of Russia PJSC (SBER RM)</a> stand out in CEMEA</li>
<li>Risks to our positive view on these select GEM banks include worse than expected GDP growth leading to worse than anticipated credit quality and slower than expected loan growth, along with limited investor appetite for GEM banks</li>
</ul>


We screen 35 GEM Banks in this report with its accompanying charts, and identify the following names as investment opportunities
In LatAm, we highlight Banco Do Brasil Sa (BBAS3 BZ) , Grupo Financiero Banorte-O (GFNORTEO MF) and Credicorp Ltd (BAP US) 
In Asia, our preferred stocks are Postal Savings Bank of China (1658 HK) , China Construction Bank H (939 HK) , Hana Financial (086790 KS) and State Bank Of India (SBIN IN) 

Commercial International Bank (COMI EY) and Sberbank of Russia PJSC (SBER RM) stand out in CEMEA
Risks to our positive view on these select GEM banks include worse than expected GDP growth leading to worse than anticipated credit quality and slower than expected loan growth, along with limited investor appetite for GEM banks


Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.<div class="content-highlight">The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.</div>Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.

This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.

Interim Div Yield Projections of Korean Financial Holdcos Ahead of June 29 Ex-Div Date

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

With Value funds making gains on Growth funds this year, where are EM Value managers positioned?Country: U/W China &amp; HK and India, O/W South Korea and Mexico.  Note also the overweight in Turkey, with 71% of the Value funds in our analysis positioned overweight versus the iShares MSCI Emerging Markets ETF.Sector:U/W Consumer Discretionary, Communication Services and Health Care.  O/W  Materials, Industrials and Financials.Read on for further data and analysis on Industry and Stock positioning.Analysis taken from our Emerging Markets Research, covering 242 active GEM funds with combined AUM of $500bn

With Value funds making gains on Growth funds this year, where are EM Value managers positioned?Country: U/W China &amp; HK and India, O/W South Korea and Mexico.  Note also the overweight in Turkey, with 71% of the Value funds in our analysis positioned overweight versus the iShares MSCI Emerging Markets ETF.Sector:U/W Consumer Discretionary, Communication Services and Health Care.  O/W  Materials, Industrials and Financials.Read on for further data and analysis on Industry and Stock positioning.Analysis taken from our Emerging Markets Research, covering 242 active GEM funds with combined AUM of $500bn

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Private Capital Markets

<div class="content-highlight">
In this insight, we provide details of Toss Bank, which received the final approval from the Korean government (Financial Services Commission) today to become the third Internet bank in Korea. The leading players in the online banking sector in Korea include KakaoBank and K-Bank. 
<a href="http://www.koreaherald.com/view.php?ud=20210609000967" target="_blank" rel="noopener">Toss Bank</a> is owned by Viva Republic, which is well-known as an operator of the fintech app Toss, which already has about 20 million users. It is expected that the Toss Bank will be launched in September 2021. Toss Bank will focus on expanding loans to people with mid-range to low credit scores in Korea. 
</div>


In this insight, we provide details of Toss Bank, which received the final approval from the Korean government (Financial Services Commission) today to become the third Internet bank in Korea. The leading players in the online banking sector in Korea include KakaoBank and K-Bank. 
Toss Bank is owned by Viva Republic, which is well-known as an operator of the fintech app Toss, which already has about 20 million users. It is expected that the Toss Bank will be launched in September 2021. Toss Bank will focus on expanding loans to people with mid-range to low credit scores in Korea. 


Toss Bank - Receives Final Govt Approval to Become the 3rd Internet Bank in Korea

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Similar to KB Financial and BNK, Hana Financial catches the eye in terms of value-quality trends and fundamental momentum. South Korea commands some top quartile opportunities within our global universe of bank stocks.A PH Score™ of 8.1 reflects an enhancement in Profitability, in headline Efficiency, in headline Asset Quality, and in Provisioning. While Common Equity/Assets (a PH Score™ variable) showed discrete erosion, other Capitalisation ratios showed marked progression, indicating that the underlying Score may understate Hana’s progression. Having said that, the positive improvement in the headline CIR may paint a slightly flattering view of Efficiency enhancement which was on an underlying basis little changed YoY while headline NPL amelioration may also embellish the Asset Quality picture somewhat though we are relatively comfortable with delinquency levels. Liquidity was impacted by double-digit credit growth.If there is an issue that concerns us, it is relatively subpar Earnings Quality, not picked up by the PH Score™ gauge. Bank Earnings here are highly dependent on trading gains and “other Noninterest Income”. This can flatter headline ratios. Debt/Equity remains high too.<div class="content-highlight">A FV of 6% a PBV of 0.47x are not unattractive given the respective thresholds of 10% and 1.0x. An Earnings Yield of 19.6% and a Total Return Ratio of 2.7x add to the attraction of the proposition. The Dividend Yield of 3.9% is a bonus. The bank commands well above-average fundamental momentum as testified by a robust PH Score™ while the VFM rankings reside in the top quartile globally.</div>Hana balances corporate credit (52.6% of Loan book) with consumer segments (44.5%0, backed mainly by Time Deposits and some transaction account funding.

Similar to KB Financial and BNK, Hana Financial catches the eye in terms of value-quality trends and fundamental momentum. South Korea commands some top quartile opportunities within our global universe of bank stocks.A PH Score™ of 8.1 reflects an enhancement in Profitability, in headline Efficiency, in headline Asset Quality, and in Provisioning. While Common Equity/Assets (a PH Score™ variable) showed discrete erosion, other Capitalisation ratios showed marked progression, indicating that the underlying Score may understate Hana’s progression. Having said that, the positive improvement in the headline CIR may paint a slightly flattering view of Efficiency enhancement which was on an underlying basis little changed YoY while headline NPL amelioration may also embellish the Asset Quality picture somewhat though we are relatively comfortable with delinquency levels. Liquidity was impacted by double-digit credit growth.If there is an issue that concerns us, it is relatively subpar Earnings Quality, not picked up by the PH Score™ gauge. Bank Earnings here are highly dependent on trading gains and “other Noninterest Income”. This can flatter headline ratios. Debt/Equity remains high too.A FV of 6% a PBV of 0.47x are not unattractive given the respective thresholds of 10% and 1.0x. An Earnings Yield of 19.6% and a Total Return Ratio of 2.7x add to the attraction of the proposition. The Dividend Yield of 3.9% is a bonus. The bank commands well above-average fundamental momentum as testified by a robust PH Score™ while the VFM rankings reside in the top quartile globally.Hana balances corporate credit (52.6% of Loan book) with consumer segments (44.5%0, backed mainly by Time Deposits and some transaction account funding.

Hana: Performing Well Despite the Caveats

South Korea

Hana Financial Group Inc., in accordance with Financial Holding Companies Act, was established on December 1, 2005, through stock transfer with the former shareholders of its subsidiaries in order to provide management services and financing to associated companies.

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Hana Financial (086790 KS)

GEM Banks 1Q21 Screens

Our GEM bank picks are derived from value and growth, plus balance sheet, metrics; we highlight Banco do Brasil, Banorte, Credicorp, PSBC, CCB,...

Victor Galliano

Interim Div Yield Projections of Korean Financial Holdcos Ahead of June 29 Ex-Div Date

This post projects the interim dividend yields of the four major Korean financial holding companies ahead of the June 29 ex-dividend date.

Sanghyun Park

EM Value Fund Positioning

With Value funds making gains on Growth funds this year, where are active Emerging Market Value managers positioned across countries, sectors,...

Steven Holden

Toss Bank - Receives Final Govt Approval to Become the 3rd Internet Bank in Korea

In this insight, we provide details of Toss Bank, which received the final approval from the Korean government today to become the third Internet...

Douglas Kim

Hana: Performing Well Despite the Caveats

Hana remains a cheap bank. Fundamental progression is robust despite some concerns about underlying dynamics versus headline results.

Paul Hollingworth

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