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

Grupo Financiero Banorte SAB d / Equity Bottom-Up

<ul>
<li>Mexican banks, along with other Mexican assets, have benefitted from the near-shoring theme and more recently, the investor sentiment change in favour of EM assets which also supported bank shares</li>
<li>Yet bank sector headwinds are emerging in the data to May, with rising funding costs eroding credit spreads and worsening credit quality trends implying a worsening in the credit cycle</li>
<li>We believe that Banorte’s 2Q23 results vindicate our caution on the shares, with evidence of spread pressure and rising credit costs; we prefer to gain Mexican bank exposure through BBVA</li>
</ul>


Mexican banks, along with other Mexican assets, have benefitted from the near-shoring theme and more recently, the investor sentiment change in favour of EM assets which also supported bank shares
Yet bank sector headwinds are emerging in the data to May, with rising funding costs eroding credit spreads and worsening credit quality trends implying a worsening in the credit cycle
We believe that Banorte’s 2Q23 results vindicate our caution on the shares, with evidence of spread pressure and rising credit costs; we prefer to gain Mexican bank exposure through BBVA


Banorte & Mexican Banks – Peaking Returns Due to Credit Spread Erosion and Worsening Credit Risk

<ul>
<li>We explore Citibank’s upcoming Banamex disposal, which appears to have become a one horse race and question whether an IPO is completely off the cards</li>
<li>Bank sector data trends to December remain robust, but headwinds are building; rising funding costs threaten credit spreads and worsening cost of credit trends, both set to erode 2023 returns</li>
<li>BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through parent BBVA shares; we remain cautious on Banorte, due to the growing risks to returns and valuation</li>
</ul>


We explore Citibank’s upcoming Banamex disposal, which appears to have become a one horse race and question whether an IPO is completely off the cards
Bank sector data trends to December remain robust, but headwinds are building; rising funding costs threaten credit spreads and worsening cost of credit trends, both set to erode 2023 returns
BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through parent BBVA shares; we remain cautious on Banorte, due to the growing risks to returns and valuation


Banamex Update & Mexican Banks’ December Data; Risks of Credit Spread Erosion & Rising Credit Costs

<ul>
<li>Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk</li>
<li>Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator</li>
<li>BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns</li>
</ul>


Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk
Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator
BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns


Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI China ETF / Technical Analysis

<ul>
<li>We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.</li>
<li>We continue to expect rangebound price action in the months ahead on the MSCI ACWI.</li>
<li>And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)</li>
</ul>


We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.
We continue to expect rangebound price action in the months ahead on the MSCI ACWI.
And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)


Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

<ul>
<li>Market dynamics remain largely bearish/unchanged, and we are sticking with our call that breaks of supports on SPX, IWM,QQQ are likely to result in a test of the 2022 lows.</li>
<li>The Nasdaq 100 (QQQ) is already testing its 2022 lows, but the S&amp;P 500 and Russell 2000 (IWM) are still 6-9% above their 2022 lows.</li>
<li>Depending on how the market responds to its 2022 lows, that could be a better area to increase risk.</li>
</ul>


Market dynamics remain largely bearish/unchanged, and we are sticking with our call that breaks of supports on SPX, IWM,QQQ are likely to result in a test of the 2022 lows.
The Nasdaq 100 (QQQ) is already testing its 2022 lows, but the S&amp;P 500 and Russell 2000 (IWM) are still 6-9% above their 2022 lows.
Depending on how the market responds to its 2022 lows, that could be a better area to increase risk.


More Downside to Lead to Buying Opportunity?; Buy Ideas in Consumer Staples, EU Banks, Gold Miners

Spain

Banco Bilbao Vizcaya Argentaria, S.A. attracts deposits and offers retail, wholesale, and investment banking services.  The Bank offers consumer and mortgage loans, private banking, asset management, insurance, mutual funds, and securities brokerage services.  It operates in Europe, Latin America, United States, China and Turkey.

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Banco Bilbao Vizcaya Argentari (BBVA SM)

Banorte & Mexican Banks – Peaking Returns Due to Credit Spread Erosion and Worsening Credit Risk

Bank sector headwinds appear in the May data and Banorte's 2Q23 results with rising funding costs eroding spreads and worsening NPL trends; we are...

Victor Galliano

Banamex Update & Mexican Banks’ December Data; Risks of Credit Spread Erosion & Rising Credit Costs

The Banamex sale is a one horse race, Mexican bank PBVs are high; is an IPO totally off the cards? December data was solid, but higher funding...

Victor Galliano

Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

The market reacted positively to Banorte’s 4Q22 results, yet from the sector data as well as Banorte's report, we see 2023 challenges from rising...

Victor Galliano

Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

We remain neutral on global equities $ACWI and expect rangebound price action in the months (possibly year) ahead. Specific $ACWI trading range we...

Vermilion Research

More Downside to Lead to Buying Opportunity?; Buy Ideas in Consumer Staples, EU Banks, Gold Miners

With market dynamics still bearish, we are sticking with our call that breaks of supports (3910 on SPX, $177.50 on IWM, and $279 on QQQ) are likely...

Vermilion Research

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52-week Range

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