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>JGB 10Y bond yields have slipped from their July high, but are well above historic lows; the outlook, in our view, is still for BoJ monetary tightening before year-end 2024</li>
<li>We see a constructive outlook with recovering domestic loan growth, available funding as well as sector evidence of higher lending rates; also, largely well controlled unrealized losses on bond portfolios</li>
<li>We keep Resona and Mizuho as our top picks for their strong gearing to higher interest rates and attractive valuations in this Japanese bank group, along with Chiba and Concordia</li>
</ul>


JGB 10Y bond yields have slipped from their July high, but are well above historic lows; the outlook, in our view, is still for BoJ monetary tightening before year-end 2024
We see a constructive outlook with recovering domestic loan growth, available funding as well as sector evidence of higher lending rates; also, largely well controlled unrealized losses on bond portfolios
We keep Resona and Mizuho as our top picks for their strong gearing to higher interest rates and attractive valuations in this Japanese bank group, along with Chiba and Concordia


Japanese Bigger Cap Banks – BoJ’s Pause Does Not De-Rail Our Expectations for Higher Interest Rates

<ul>
<li>The sharp Japanese market correction has hit the banks hard, and heightened market volatility is likely to remain a feature, at least in the very near term</li>
<li>Nonetheless, the big five’s results in the first quarter to June-end paint a reassuring picture, and we see that BoJ is pausing on rate rises in these unsettled markets</li>
<li>Among the big five Japanese bank shares, we highlight Resona and Mizuho in particular for their strong gearing to higher interest rates; we are also positive on SMFG and Concordia</li>
</ul>


The sharp Japanese market correction has hit the banks hard, and heightened market volatility is likely to remain a feature, at least in the very near term
Nonetheless, the big five’s results in the first quarter to June-end paint a reassuring picture, and we see that BoJ is pausing on rate rises in these unsettled markets
Among the big five Japanese bank shares, we highlight Resona and Mizuho in particular for their strong gearing to higher interest rates; we are also positive on SMFG and Concordia


Japanese Big Five Banks – Opportunity in the Face of Market Turmoil; Focus on Resona and Mizuho

<ul>
<li>The Bank of Japan has raised its short-term interest rate to 0.25% from 0.1% ahead of the core of consensus expectations, and BoJ plans to pare back purchases of JGBs</li>
<li>We focus on those big-cap Japanese banks that are well geared into higher domestic rates through loan books and BoJ deposits, that also have lesser exposure to rising JGB yields</li>
<li>We stay broadly positive on Japanese bank shares, despite their performance; we add Chiba to the buy list of Resona, Mizuho, SMFG and Concordia, whilst keeping Kyoto as a sell</li>
</ul>


The Bank of Japan has raised its short-term interest rate to 0.25% from 0.1% ahead of the core of consensus expectations, and BoJ plans to pare back purchases of JGBs
We focus on those big-cap Japanese banks that are well geared into higher domestic rates through loan books and BoJ deposits, that also have lesser exposure to rising JGB yields
We stay broadly positive on Japanese bank shares, despite their performance; we add Chiba to the buy list of Resona, Mizuho, SMFG and Concordia, whilst keeping Kyoto as a sell


Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure

Kyoto Financial Group  / Equity Bottom-Up

<ul>
<li>Kyoto Financial’s stakes in three key listed Japanese corporates are valued at over 85% of its market capitalization with its total equity holdings accounting for 130%+ of its market capitalization</li>
<li>Kyoto management intends to retain the bulk of the bank’s equity holdings, opposing the growing trend for Japanese listed companies to unwind crossholdings; management will review this policy in November</li>
<li>In the near term, we see no major catalyst for Kyoto to accelerate its equity holdings unwind and so, combined with its underwhelming fundamentals, we are negative on Kyoto Financial</li>
</ul>


Kyoto Financial’s stakes in three key listed Japanese corporates are valued at over 85% of its market capitalization with its total equity holdings accounting for 130%+ of its market capitalization
Kyoto management intends to retain the bulk of the bank’s equity holdings, opposing the growing trend for Japanese listed companies to unwind crossholdings; management will review this policy in November
In the near term, we see no major catalyst for Kyoto to accelerate its equity holdings unwind and so, combined with its underwhelming fundamentals, we are negative on Kyoto Financial


Kyoto Financial Group (5844 JP) – Limited Shareholdings Unwind, for Now

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>We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.</li>
<li>Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.</li>
<li>Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.</li>
</ul>


We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.
Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.
Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.


Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

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.

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Resona Holdings (8308 JP)

Japanese Bigger Cap Banks – BoJ’s Pause Does Not De-Rail Our Expectations for Higher Interest Rates

JGB yields have eased a bit, but BoJ still set to tighten rates. Outlook for loan growth, higher lending rates supports buys on Resona, Mizuho,...

Victor Galliano

Japanese Big Five Banks – Opportunity in the Face of Market Turmoil; Focus on Resona and Mizuho

Japanese banks hit hard by market turmoil but first quarter data to June is reassuring; BoJ pausing on rate rises. Resona and Mizuho stand out for...

Victor Galliano

Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure

Bank of Japan raises short-term interest rate to 0.25%, plans to reduce JGB purchases. We like Resona, Mizuho, SMFG, Concordia big-cap bank shares...

Victor Galliano

Kyoto Financial Group (5844 JP) – Limited Shareholdings Unwind, for Now

Among bigger cap Japanese banks, we are negative on Kyoto Financial as it lacks near term catalysts to accelerate its equity holdings unwind and...

Victor Galliano

Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

We look at how important or unimportant core banking income is to 50 banks in Japan, to better understand where divesting cross shareholding can be...

Daniel Tabbush

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Bigger Cap Banks – BoJ’s Pause Does Not De-Rail Our Expectations for Higher Interest Rates

​JGB yields have eased a bit, but BoJ still set to tighten rates. Outlook for loan growth, higher lending rates supports buys on Resona, Mizuho,...

Victor Galliano

Japanese Big Five Banks – Opportunity in the Face of Market Turmoil; Focus on Resona and Mizuho

​Japanese banks hit hard by market turmoil but first quarter data to June is reassuring; BoJ pausing on rate rises. Resona and Mizuho stand out for...

Victor Galliano

Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure

​Bank of Japan raises short-term interest rate to 0.25%, plans to reduce JGB purchases. We like Resona, Mizuho, SMFG, Concordia big-cap bank shares...

Victor Galliano

Kyoto Financial Group (5844 JP) – Limited Shareholdings Unwind, for Now

Among bigger cap Japanese banks, we are negative on Kyoto Financial as it lacks near term catalysts to accelerate its equity holdings unwind and...

Victor Galliano

Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

We look at how important or unimportant core banking income is to 50 banks in Japan, to better understand where divesting cross shareholding can be...

Daniel Tabbush

JGB yields have eased a bit, but BoJ still set to tighten rates. Outlook for loan growth, higher lending rates supports buys on Resona, Mizuho,...

Japanese banks hit hard by market turmoil but first quarter data to June is reassuring; BoJ pausing on rate rises. Resona and Mizuho stand out for...

Bank of Japan raises short-term interest rate to 0.25%, plans to reduce JGB purchases. We like Resona, Mizuho, SMFG, Concordia big-cap bank shares...