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>Bradesco’s re-rating is supported by bank returns recovery and by its premium insurance operations; we estimate that insurance operations account for close to 40% of group value, excluding Bradsaude</li>
<li>We remain positive on Inter as it is deep value for an EM neobank, yet we would advise investors to lighten long positions</li>
<li>The prospect of a very strong El Niño episode could adversely impact Banrisul’s cost of risk going forward, given its exposure to agribusiness credit</li>
</ul>


Bradesco’s re-rating is supported by bank returns recovery and by its premium insurance operations; we estimate that insurance operations account for close to 40% of group value, excluding Bradsaude
We remain positive on Inter as it is deep value for an EM neobank, yet we would advise investors to lighten long positions
The prospect of a very strong El Niño episode could adversely impact Banrisul’s cost of risk going forward, given its exposure to agribusiness credit


Brazil Banks – Stick with Buys on Bradesco and Inter, Calling Time on Banrisul Long

Equity Capital Markets

<ul>
<li>Our initial PicPay report assumed a post-money IPO valuation of USD2.5bn; the disclosed price range implies an IPO valuation of USD2.07bn to USD2.53bn, with between USD365m and USD500m being raised</li>
<li>The key challenge we see for PicPay is credit quality; stage 3 loans to total loans have risen fast, despite secured loans accounting for 70%+ of the total</li>
<li>We believe that PicPay is more comparable to Banco Pan not Inter and certainly not Nubank; therefore, we see more appropriate IPO pricing at the bottom of the range (USD16)</li>
</ul>


Our initial PicPay report assumed a post-money IPO valuation of USD2.5bn; the disclosed price range implies an IPO valuation of USD2.07bn to USD2.53bn, with between USD365m and USD500m being raised
The key challenge we see for PicPay is credit quality; stage 3 loans to total loans have risen fast, despite secured loans accounting for 70%+ of the total
We believe that PicPay is more comparable to Banco Pan not Inter and certainly not Nubank; therefore, we see more appropriate IPO pricing at the bottom of the range (USD16)


PicPay Pre-IPO Revisited – Further Thoughts on Valuation

<ul>
<li>PicPay is a Brazilian fintech offering a range of digital banking and financial services including payments to consumer and small and medium business clients</li>
<li>No valuation range has been released yet for PicPay’s IPO, but press reports indicate a USD500m potential offering; we assume a post-money market capitalisation at IPO of USD2.5bn</li>
<li>PicPay is higher quality than Banco PAN, especially in terms of NPL ratio, but PicPay falls short, in terms of its operating metrics, versus Inter and well short of Nubank</li>
</ul>


PicPay is a Brazilian fintech offering a range of digital banking and financial services including payments to consumer and small and medium business clients
No valuation range has been released yet for PicPay’s IPO, but press reports indicate a USD500m potential offering; we assume a post-money market capitalisation at IPO of USD2.5bn
PicPay is higher quality than Banco PAN, especially in terms of NPL ratio, but PicPay falls short, in terms of its operating metrics, versus Inter and well short of Nubank


PicPay Pre-IPO Research – Initial Thoughts on Its Valuation Versus LatAm Fintechs

<ul>
<li>Bradesco’s re-rating is supported by credit quality improvements and by its solid insurance operations’ returns; we now estimate that the insurance operations account for close to half of group value</li>
<li>We add small cap Banrisul to our coverage and also to our buy list for its deep value qualities and improving returns, with Banrisul ranking top in our proprietary scorecard</li>
<li>Banco do Brasil remains a neutral, due to heightened political risk and worsening credit quality; holdco Itausa remains an attractive vehicle through which to gain equity exposure to Banco Itaú</li>
</ul>


Bradesco’s re-rating is supported by credit quality improvements and by its solid insurance operations’ returns; we now estimate that the insurance operations account for close to half of group value
We add small cap Banrisul to our coverage and also to our buy list for its deep value qualities and improving returns, with Banrisul ranking top in our proprietary scorecard
Banco do Brasil remains a neutral, due to heightened political risk and worsening credit quality; holdco Itausa remains an attractive vehicle through which to gain equity exposure to Banco Itaú


Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

<ul>
<li>We close out our long on Inter downgrading it from buy to neutral; Inter was the more profitable half of our prior pairs trade with our past short on Nubank</li>
<li>This is in part a tactical downgrade, locking in gains but it also reflects that Inter is no longer a bargain neobank in terms of valuations</li>
<li>In addition, Inter’s neobank metrics continue to lag those of its core peer Nubank meaningfully, and its risk weighted asset growth is accelerating, consuming more of its modest capital cushion</li>
</ul>


We close out our long on Inter downgrading it from buy to neutral; Inter was the more profitable half of our prior pairs trade with our past short on Nubank
This is in part a tactical downgrade, locking in gains but it also reflects that Inter is no longer a bargain neobank in terms of valuations
In addition, Inter’s neobank metrics continue to lag those of its core peer Nubank meaningfully, and its risk weighted asset growth is accelerating, consuming more of its modest capital cushion


Inter (INTR US) – Closing Out Our Long Position on Inter

Brazil

Inter & Co is a Brazilian financial technology company that operates as a digital multi-service bank, offering a comprehensive range of banking, credit, investments, payments, and lifestyle solutions. The company provides services through a digital banking super app, which includes checking accounts, loans, insurance, and a marketplace. Founded in 1994, Inter & Co is headquartered in Belo Horizonte, Brazil.

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Inter & Co (INBR32 BR)

Brazil Banks – Stick with Buys on Bradesco and Inter, Calling Time on Banrisul Long

Bradesco's re-rating supported by insurance operations, Inter remains deep value but investors advised to lighten positions, downgrading Banrisul...

Victor Galliano

PicPay Pre-IPO Revisited – Further Thoughts on Valuation

PicPay's IPO valuation ranges from USD2.07bn to USD2.53bn, with credit quality as a key concern; we see Banco Pan as its key comparable, and...

Victor Galliano

PicPay Pre-IPO Research – Initial Thoughts on Its Valuation Versus LatAm Fintechs

We base Brazil fintech PicPay's initial IPO valuation on those of LatAm fintech peers. We see it as higher quality than Banco PAN but it lags...

Victor Galliano

Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

Victor Galliano

Inter (INTR US) – Closing Out Our Long Position on Inter

We lock in gains from our Inter long position, downgrading from buy to neutral. Inter's valuation no longer makes it a bargain among EM neobanks,...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Brazil Banks – Stick with Buys on Bradesco and Inter, Calling Time on Banrisul Long

​Bradesco's re-rating supported by insurance operations, Inter remains deep value but investors advised to lighten positions, downgrading Banrisul...

Victor Galliano

PicPay Pre-IPO Revisited – Further Thoughts on Valuation

​PicPay's IPO valuation ranges from USD2.07bn to USD2.53bn, with credit quality as a key concern; we see Banco Pan as its key comparable, and...

Victor Galliano

PicPay Pre-IPO Research – Initial Thoughts on Its Valuation Versus LatAm Fintechs

We base Brazil fintech PicPay's initial IPO valuation on those of LatAm fintech peers. We see it as higher quality than Banco PAN but it lags...

Victor Galliano

Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

​Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

Victor Galliano

Inter (INTR US) – Closing Out Our Long Position on Inter

​We lock in gains from our Inter long position, downgrading from buy to neutral. Inter's valuation no longer makes it a bargain among EM neobanks,...

Victor Galliano

Bradesco's re-rating supported by insurance operations, Inter remains deep value but investors advised to lighten positions, downgrading Banrisul...

PicPay's IPO valuation ranges from USD2.07bn to USD2.53bn, with credit quality as a key concern; we see Banco Pan as its key comparable, and...

Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

We lock in gains from our Inter long position, downgrading from buy to neutral. Inter's valuation no longer makes it a bargain among EM neobanks,...