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 Capital Markets

<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

Equity Bottom-Up

<ul>
<li>We apply our weighted scorecard with metrics adapted for the EM neobanks; Kakaobank screens best whilst Bank Jago is the bottom marker</li>
<li>Despite this, we believe that the most compelling investment ideas are in Brazilian neobanks in the form of a pairs trade, and we add qualitative factors to the investment thesis</li>
<li>We recommend a long on Inter, the second best rated neobank on the scorecard, against a short on Nubank, the latter having the second worst rating on the scorecard</li>
</ul>


We apply our weighted scorecard with metrics adapted for the EM neobanks; Kakaobank screens best whilst Bank Jago is the bottom marker
Despite this, we believe that the most compelling investment ideas are in Brazilian neobanks in the form of a pairs trade, and we add qualitative factors to the investment thesis
We recommend a long on Inter, the second best rated neobank on the scorecard, against a short on Nubank, the latter having the second worst rating on the scorecard


EM Neobanks – Pairs Trade; Long Inter and Short Nubank

<ul>
<li>We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy</li>
<li>Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations</li>
<li>Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch</li>
</ul>


We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy
Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations
Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch


EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

<ul><li>We remain positive on Rakuten Bank, with its group ecosphere as a source of customer growth, its low cost base, and extremely low NPL ratio</li><li>Rakuten Bank trades on the lowest PE multiple of the neobank peer group , with the low ROE to PBV ratio close to the best of its neobank peers</li><li>Nubank shares have done well since we upgraded to a buy in January; we recommend investors to take profits given Nubank’s  limited potential for positive surprises and its stretched valuations</li></ul>

We remain positive on Rakuten Bank, with its group ecosphere as a source of customer growth, its low cost base, and extremely low NPL ratioRakuten Bank trades on the lowest PE multiple of the neobank peer group , with the low ROE to PBV ratio close to the best of its neobank peersNubank shares have done well since we upgraded to a buy in January; we recommend investors to take profits given Nubank’s  limited potential for positive surprises and its stretched valuations

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

<ul>
<li>4Q22 results confirm that Nubank is the benchmark among EM neobanks in terms of activity rates, as well as trends in revenues and costs per client and digital efficiencies</li>
<li>We see further potential for broadening and deepening the product offer to customers, at little incremental cost especially in Brazil, to drive cost effective revenue growth</li>
<li>Our proprietary Nubank model forecasts are broadly in sync with positive consensus estimates; we forecast group ROE of close to 30% in FY 2025, despite high cost of credit assumptions</li>
</ul>


4Q22 results confirm that Nubank is the benchmark among EM neobanks in terms of activity rates, as well as trends in revenues and costs per client and digital efficiencies
We see further potential for broadening and deepening the product offer to customers, at little incremental cost especially in Brazil, to drive cost effective revenue growth
Our proprietary Nubank model forecasts are broadly in sync with positive consensus estimates; we forecast group ROE of close to 30% in FY 2025, despite high cost of credit assumptions


Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Brazil

Banco Pan is a Brazilian commercial bank offering a wide range of transactional banking, credit products, and financial services, including payroll loans, vehicle financing, credit cards, and insurance. The bank primarily serves public servants, retirees, pensioners, and general consumers in Brazil. Banco Pan is headquartered in São Paulo, Brazil, and was founded in 1969.

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Banco Pan (BPAN4 BZ)

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

EM Neobanks – Pairs Trade; Long Inter and Short Nubank

Brazilian neobanks present compelling opportunities, with Inter recommended as a long and Nubank as a short based on their weighted scorecard...

Victor Galliano

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...

Victor Galliano

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

In listed neobanks, we stay positive on Rakuten bank for its growth potential and attractive valuation, but it is time to take profits on Nubank.

Victor Galliano

Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Nubank presented solid 4Q22 results, with high activity rates, growing revenue per customer, controlled costs per customer whilst keeping a sound...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

EM Neobanks – Pairs Trade; Long Inter and Short Nubank

Brazilian neobanks present compelling opportunities, with Inter recommended as a long and Nubank as a short based on their weighted scorecard...

Victor Galliano

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

​Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...

Victor Galliano

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

In listed neobanks, we stay positive on Rakuten bank for its growth potential and attractive valuation, but it is time to take profits on Nubank.

Victor Galliano

Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Nubank presented solid 4Q22 results, with high activity rates, growing revenue per customer, controlled costs per customer whilst keeping a sound...

Victor Galliano

Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...