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>The December BoJ rate hike, the sector interest rate spreads continuing to widen and the JGB yield curve steepening further are positive for Japanese banks’ return prospects</li>
<li>We focus on three core factors; the banks’ gearing to higher domestic interest rates, the value of banks’ cross-holdings to market capitalization and each bank’s valuations relative to returns</li>
<li>We believe that a key driver is Japan’s interest rate normalisation; we keep our top pick Resona Holdings on the buy list, whilst also adding Shizuoka and Yokohama Financial</li>
</ul>


The December BoJ rate hike, the sector interest rate spreads continuing to widen and the JGB yield curve steepening further are positive for Japanese banks’ return prospects
We focus on three core factors; the banks’ gearing to higher domestic interest rates, the value of banks’ cross-holdings to market capitalization and each bank’s valuations relative to returns
We believe that a key driver is Japan’s interest rate normalisation; we keep our top pick Resona Holdings on the buy list, whilst also adding Shizuoka and Yokohama Financial


Japanese Bigger Cap Banks – Interest Rate Normalisation Drives the Bull Case

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> got very exciting when an activist got involved. The less so when that activist sold its shares to <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a> at a fat premium.</li>
<li>DG lost its driver. Perhaps Resona is a longer-term catalyst but it's unclear. Given they are down 60% so far, they may be looking for new blood. Hayashi-san is 66.</li>
<li>Now Digital Garage's big equity affiliate stake asset will turn into cash. This is real value. It has been but this deal will double (or more than double) BVPS.</li>
</ul>



Digital Garage (4819 JP) got very exciting when an activist got involved. The less so when that activist sold its shares to Resona Holdings (8308 JP) at a fat premium.
DG lost its driver. Perhaps Resona is a longer-term catalyst but it's unclear. Given they are down 60% so far, they may be looking for new blood. Hayashi-san is 66.
Now Digital Garage's big equity affiliate stake asset will turn into cash. This is real value. It has been but this deal will double (or more than double) BVPS.


[Japan Event] Digital Garage (4819) Is The Wrong Price

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>There is very high delta in 30-year JGB yields in the recent month, and preceding periods</li>
<li>This is very much unlike what we see with the 1-year JGBs, different implications.</li>
<li>Insurance companies are the major holders of long-dated JGBs where banks have low duration on their bond holdings.</li>
</ul>


There is very high delta in 30-year JGB yields in the recent month, and preceding periods
This is very much unlike what we see with the 1-year JGBs, different implications.
Insurance companies are the major holders of long-dated JGBs where banks have low duration on their bond holdings.


Japan - Sharply Higher Long-Dated JGBs Should Mean Sizable Valuation Losses at Insurers, Not Banks

<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

Japan

Resona Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides financial services, including banking, trust operations, and credit card services. Resona Holdings also offers consulting services related to personal loans, asset management, and asset succession.

Price Gauge
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Resona Holdings (8308 JP)

Japanese Bigger Cap Banks – Interest Rate Normalisation Drives the Bull Case

Japanese banks benefit from further steps to interest rate normalisation; our buy picks are Resona Holdings, Shizuoka, Yokohama due to gearing to...

Victor Galliano

[Japan Event] Digital Garage (4819) Is The Wrong Price

Digital Garage was the wrong price in July when the bid for Kakaku was lower. It is the wrong price today with the Kakaku price higher. It is...

Travis Lundy

Japan - Sharply Higher Long-Dated JGBs Should Mean Sizable Valuation Losses at Insurers, Not Banks

Japan's insurance companies are more exposed and highly exposed to rising long-dated JGB yields, unlike for banks. The former will have more...

Daniel Tabbush

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Bigger Cap Banks – Interest Rate Normalisation Drives the Bull Case

​Japanese banks benefit from further steps to interest rate normalisation; our buy picks are Resona Holdings, Shizuoka, Yokohama due to gearing to...

Victor Galliano

[Japan Event] Digital Garage (4819) Is The Wrong Price

Digital Garage was the wrong price in July when the bid for Kakaku was lower. It is the wrong price today with the Kakaku price higher. It is...

Travis Lundy

Japan - Sharply Higher Long-Dated JGBs Should Mean Sizable Valuation Losses at Insurers, Not Banks

Japan's insurance companies are more exposed and highly exposed to rising long-dated JGB yields, unlike for banks. The former will have more...

Daniel Tabbush

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

Japanese banks benefit from further steps to interest rate normalisation; our buy picks are Resona Holdings, Shizuoka, Yokohama due to gearing to...