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>Bank sector trends to October continue to be sound, but return headwinds are emerging; further tightening credit spreads and initial signs of worsening in consumer credit quality</li>
<li>To October, funding costs are rising faster than loan yields, crimping credit spreads, and the rising credit card cost of risk indicates a worsening outlook for consumer credit quality</li>
<li>BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, and we recommend taking profits on BanBajio</li>
</ul>


Bank sector trends to October continue to be sound, but return headwinds are emerging; further tightening credit spreads and initial signs of worsening in consumer credit quality
To October, funding costs are rising faster than loan yields, crimping credit spreads, and the rising credit card cost of risk indicates a worsening outlook for consumer credit quality
BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, and we recommend taking profits on BanBajio


Mexican Banks’ October Data and Trends – Credit Spread Erosion a Bigger Threat than Credit Quality?

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 EAFE ETF / Technical Analysis

<ul>
<li>We continue to believe that a bearish intermediate-term outlook is appropriate as long as the YTD downtrends remain intact on MSCI ACWI (ACWI-US), MSCI ACWI ex-US (ACWX-US), and EAFE (EFA-US).</li>
<li>We would turn bullish only on reversals of those downtrends. With that said, a bear market rally has officially begun, something that we have discussed since our Sept.29 Int'l Compass</li>
<li>We expect to see rallies to their respective YTD downtrends (ACWX, EFA, etc.). We highlight buys that are likely to outperform on this bear market rally.</li>
</ul>


We continue to believe that a bearish intermediate-term outlook is appropriate as long as the YTD downtrends remain intact on MSCI ACWI (ACWI-US), MSCI ACWI ex-US (ACWX-US), and EAFE (EFA-US).
We would turn bullish only on reversals of those downtrends. With that said, a bear market rally has officially begun, something that we have discussed since our Sept.29 Int'l Compass
We expect to see rallies to their respective YTD downtrends (ACWX, EFA, etc.). We highlight buys that are likely to outperform on this bear market rally.


Bear Market Rally in Progress as DXY, Global Sovereign 10-Yr Yields Fall; Buy Ideas Within Leaders

Thematic (Sector/Industry)

<ul>
<li>Bank sector trends to August continue to be robust, but potential challenges lie ahead for returns; tightening credit spreads and a potential worsening of credit quality</li>
<li>Credit spreads are being crimped by fast rising funding costs, and there is emerging evidence of worsening consumer credit quality through consumer cost of risk and delinquency</li>
<li>BBVA Mexico generates the highest ROE versus its peers due to strong revenue returns, Banorte has the lowest NPL ratio and BanBajio has high capital ratios and returns</li>
</ul>


Bank sector trends to August continue to be robust, but potential challenges lie ahead for returns; tightening credit spreads and a potential worsening of credit quality
Credit spreads are being crimped by fast rising funding costs, and there is emerging evidence of worsening consumer credit quality through consumer cost of risk and delinquency
BBVA Mexico generates the highest ROE versus its peers due to strong revenue returns, Banorte has the lowest NPL ratio and BanBajio has high capital ratios and returns


Mexican Banks’ August Data and Trends – as Good as It Gets?

Event-Driven

Grupo Financiero Banorte SAB d / Event-Driven

<ul>
<li>Banorte and Santander have both hired M&amp;A advisors for a potential Citibanamex bid, according to Reuters; Banco Azteca is not participating in the bidding, whilst Inbursa is potentially still interested</li>
<li>In the event of a bid, we do not expect Santander to be aggressive on price; Banorte could be more aggressive, which would increase its chances of a winning bid</li>
<li>Were Banorte to acquire Citibanamex, we continue to believe that its prospective dividend could be at risk; in essence, the risks of M&amp;A still outweigh the potential opportunities</li>
</ul>


Banorte and Santander have both hired M&amp;A advisors for a potential Citibanamex bid, according to Reuters; Banco Azteca is not participating in the bidding, whilst Inbursa is potentially still interested
In the event of a bid, we do not expect Santander to be aggressive on price; Banorte could be more aggressive, which would increase its chances of a winning bid
Were Banorte to acquire Citibanamex, we continue to believe that its prospective dividend could be at risk; in essence, the risks of M&amp;A still outweigh the potential opportunities


CitiBanamex – Potential Bidders Get Serious, We Stay Cautious on Banorte

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Turkiye Garanti Bankasi As / Event-Driven

<ul>
<li>Until last week, BBVA had already secured a 71.1% stake in Garanti. The deadline to accept BBVA's takeover bid ends on 18 May. Settlement will take place on 19 May.</li>
<li>Gross spread is 0.2%. Recently, the offer price has acted as a support for the share price, which may drop if BBVA doesn't reach the squeeze-out threshold. Tender.
</li>
<li>The squeeze-out threshold is 98% (95% for delisting). My understanding is that the squeeze-out price is arithmetic average of the daily VWAP in the 30 days before threshold disclosure. </li>
</ul>


Until last week, BBVA had already secured a 71.1% stake in Garanti. The deadline to accept BBVA's takeover bid ends on 18 May. Settlement will take place on 19 May.
Gross spread is 0.2%. Recently, the offer price has acted as a support for the share price, which may drop if BBVA doesn't reach the squeeze-out threshold. Tender.

The squeeze-out threshold is 98% (95% for delisting). My understanding is that the squeeze-out price is arithmetic average of the daily VWAP in the 30 days before threshold disclosure. 


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)

Mexican Banks’ October Data and Trends – Credit Spread Erosion a Bigger Threat than Credit Quality?

Mexican bank October data show more credit spread erosion and signs of poorer credit quality; we advise BanBajio holders to take profits, we stay...

Victor Galliano

Bear Market Rally in Progress as DXY, Global Sovereign 10-Yr Yields Fall; Buy Ideas Within Leaders

Bear Market Rally in Progress as $DXY, Global Sovereign 10-Year Yields Decline. Italy FTSE MIB with a bullish YTD downtrend reversal, Switzerland...

Vermilion Research

Mexican Banks’ August Data and Trends – as Good as It Gets?

Bank sector trends to August continue to be robust, but potential challenges lie ahead; tightening credit spreads and a potential NPL worsening; we...

Victor Galliano

CitiBanamex – Potential Bidders Get Serious, We Stay Cautious on Banorte

Banorte and Santander hire M&A advisors for their Banamex bids, Inbursa is a likely candidate; Banorte remains the favourite, we believe, and so we...

Victor Galliano

BBVA/Garanti: End of Offer Period

Prior to the end of the extended offer period (18 May), BBVA has already secured a 71% stake. With the share price supported by the offer (and risk...

Jesus Rodriguez Aguilar

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