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>BoJ’s lower GDP growth forecasts add weight to the rate hike deferral; we focus on big-cap banks that have more in the tank than high gearing to rising benchmark rates</li>
<li>An increasingly important factor, in our view, is the share of strategic equity holdings relative to market capitalization; Kyoto is top on this metric, followed by Shizuoka, Resona and Mizuho</li>
<li>With the lack of the rate hike catalyst in the near term, we remove SMFG from the buy list and would look to lighten holdings selectively in other Japanese banks</li>
</ul>


BoJ’s lower GDP growth forecasts add weight to the rate hike deferral; we focus on big-cap banks that have more in the tank than high gearing to rising benchmark rates
An increasingly important factor, in our view, is the share of strategic equity holdings relative to market capitalization; Kyoto is top on this metric, followed by Shizuoka, Resona and Mizuho
With the lack of the rate hike catalyst in the near term, we remove SMFG from the buy list and would look to lighten holdings selectively in other Japanese banks


Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

<ul>
<li>The story for Japan's banks is multifaceted with several line items working in tandem to support profit and profit delta</li>
<li>Net interest income strength that we see with MUFG, SMFG, Chiba and SBI Sumishin Net Bank can continue, given outlook on loans and pricing</li>
<li>Delta in credit costs is generally benign, allowing good flow through, with a recurring nature of equity trading gains - a unique feature in Japan banking</li>
</ul>


The story for Japan's banks is multifaceted with several line items working in tandem to support profit and profit delta
Net interest income strength that we see with MUFG, SMFG, Chiba and SBI Sumishin Net Bank can continue, given outlook on loans and pricing
Delta in credit costs is generally benign, allowing good flow through, with a recurring nature of equity trading gains - a unique feature in Japan banking


Japan Banks - Net Interest Income, Credit Cost, Trading Gains, All Support Profit

<ul>
<li>The BOJ released its loan officer survey on 21 April which is generally positive for lending demand at firms and eased credit standards (willingness to lend)</li>
<li>Demand for credit over past 3 months for firms, 43 respondents were about the same, 6 were moderately stronger, 1 substantially stronger. No respondents were weaker</li>
<li>Lending policies saw most respondents unchanged, but there were some as 'eased somewhat' and 1 'eased considerably' with no respondents reporting tightening</li>
</ul>


The BOJ released its loan officer survey on 21 April which is generally positive for lending demand at firms and eased credit standards (willingness to lend)
Demand for credit over past 3 months for firms, 43 respondents were about the same, 6 were moderately stronger, 1 substantially stronger. No respondents were weaker
Lending policies saw most respondents unchanged, but there were some as 'eased somewhat' and 1 'eased considerably' with no respondents reporting tightening


Japan - New Loan Officer Survey Is Positive for Lending Growth, for Banks, Underlying Economy

Kyoto Financial Group  / Equity Bottom-Up

<ul>
<li>Kyoto Financial’s president has hinted at increasing disposals in strategic equity holdings; the prior target was a JPY100bn reduction in holdings by March 2029, now there is talk of JPY200-300bn</li>
<li>We estimate Kyoto Financial’s equity holdings relative to market cap at 140%+, well above its peer banks; yet, until very recently, the president had been against meaningfully reducing equity holdings</li>
<li>The president’s change of view leads us to upgrade Kyoto Financial to a buy; the change in outlook means that there is real potential to extract value for shareholders</li>
</ul>


Kyoto Financial’s president has hinted at increasing disposals in strategic equity holdings; the prior target was a JPY100bn reduction in holdings by March 2029, now there is talk of JPY200-300bn
We estimate Kyoto Financial’s equity holdings relative to market cap at 140%+, well above its peer banks; yet, until very recently, the president had been against meaningfully reducing equity holdings
The president’s change of view leads us to upgrade Kyoto Financial to a buy; the change in outlook means that there is real potential to extract value for shareholders


Kyoto Financial Group (TSE:5844) – Positive Shift in C-Suite Outlook

<ul>
<li>Global macro hurdles following “liberation day” have hit Japanese banks’ share prices hard; global recession risks are on the rise and BoJ monetary policy normalization is at best delayed</li>
<li>With investors betting on the safe haven of Japanese government bonds, the JGB yield curve has flattened since March-end which adds to the Japanese banks’ hurdles</li>
<li>Despite maintaining our constructive medium to long term view on Japanese banks, we expect challenges in the near-term and we would reduce long exposures to Resona, Mizuho, SMFG and Shizuoka</li>
</ul>


Global macro hurdles following “liberation day” have hit Japanese banks’ share prices hard; global recession risks are on the rise and BoJ monetary policy normalization is at best delayed
With investors betting on the safe haven of Japanese government bonds, the JGB yield curve has flattened since March-end which adds to the Japanese banks’ hurdles
Despite maintaining our constructive medium to long term view on Japanese banks, we expect challenges in the near-term and we would reduce long exposures to Resona, Mizuho, SMFG and Shizuoka


Japanese Big Cap Banks – Trump’s Trade War Headwinds

Japan

Sumitomo Mitsui Financial Group, Inc. manages financial operations for its subsidiaries. The Company provides commercial banking and a variety of financial services.

Sumitomo Mitsui Financial Group (8316 JP)

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Sumitomo Mitsui Financial Group (8316 JP)

Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes

Focusing on big-cap banks that have more in the tank than high gearing to rising interest rates; Kyoto is top in terms of share of equity holdings...

Victor Galliano

Japan Banks - Net Interest Income, Credit Cost, Trading Gains, All Support Profit

While macro story seems strong and improving for Japan's banks we see at the micro level, there are several line items all working in favor of net...

Daniel Tabbush

Japan - New Loan Officer Survey Is Positive for Lending Growth, for Banks, Underlying Economy

Newly released Loan Officer Survey by BOJ has positive implications for current and forward loan growth, especially to companies. We can also...

Daniel Tabbush

Kyoto Financial Group (TSE:5844) – Positive Shift in C-Suite Outlook

Kyoto Financial plans to double or triple disposals in equity holdings, which could equate to 40%+ of market cap; we upgrade to a buy rating,...

Victor Galliano

Japanese Big Cap Banks – Trump’s Trade War Headwinds

Trade war means rising recession risks, delayed BoJ rate hike and flatter JGB yield curve; despite the banks' positive long-term outlook, reduce...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes

Focusing on big-cap banks that have more in the tank than high gearing to rising interest rates; Kyoto is top in terms of share of equity holdings...

Victor Galliano

Japan Banks - Net Interest Income, Credit Cost, Trading Gains, All Support Profit

While macro story seems strong and improving for Japan's banks we see at the micro level, there are several line items all working in favor of net...

Daniel Tabbush

Japan - New Loan Officer Survey Is Positive for Lending Growth, for Banks, Underlying Economy

Newly released Loan Officer Survey by BOJ has positive implications for current and forward loan growth, especially to companies. We can also...

Daniel Tabbush

Kyoto Financial Group (TSE:5844) – Positive Shift in C-Suite Outlook

​Kyoto Financial plans to double or triple disposals in equity holdings, which could equate to 40%+ of market cap; we upgrade to a buy rating,...

Victor Galliano

Japanese Big Cap Banks – Trump’s Trade War Headwinds

Trade war means rising recession risks, delayed BoJ rate hike and flatter JGB yield curve; despite the banks' positive long-term outlook, reduce...

Victor Galliano

Kyoto Financial plans to double or triple disposals in equity holdings, which could equate to 40%+ of market cap; we upgrade to a buy rating,...