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.

Thematic (Sector/Industry)

<ul>
<li>The investor rotation into value focusing in on EM and DM banks; our key picks are <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a>, <a href="https://www.smartkarma.com/entities/turkiye-garanti-bankasi-as" target="_blank" data-smartkarma-citation="entities:25026:1" rel="noopener">Turkiye Garanti Bankasi As (GARAN TI)</a>, <a href="https://www.smartkarma.com/entities/commercial-international-bank" target="_blank" data-smartkarma-citation="entities:27625:1" rel="noopener">Commercial International Bank (COMI EY)</a> in EM banks, and <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a>, <a href="https://www.smartkarma.com/entities/caixabank-sa" target="_blank" data-smartkarma-citation="entities:21255:1" rel="noopener">CaixaBank SA (CABK SM)</a>, and <a href="https://www.smartkarma.com/entities/bper-banca-s-p-a" target="_blank" data-smartkarma-citation="entities:21165:1" rel="noopener">BPER Banca S.p.A (BPE IM)</a> in Southern Europe banks</li>
<li>Exchanges and Big Data, the convergence; <a href="https://www.smartkarma.com/entities/intercontinental-exchange-inc" target="_blank" data-smartkarma-citation="entities:10221:1" rel="noopener">Intercontinental Exchange (ICE US)</a> is strong on recurring revenues, and both ICE and <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> should deliver shareholder value creation from transformative M&amp;A</li>
<li>Potential for premium growth and returns in digital payments; we like <a href="https://www.smartkarma.com/entities/nexi-spa" target="_blank" data-smartkarma-citation="entities:28921:1" rel="noopener">Nexi SpA (NEXI IM)</a>, where we see clear benefits from its M&amp;A, and we see <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a> as a core holding</li>
<li>Digital wealth managers focus on the mass affluent; <a href="https://www.smartkarma.com/entities/finecobank-banca-fineco-spa" target="_blank" data-smartkarma-citation="entities:21188:1" rel="noopener">Finecobank Banca Fineco (FBK IM)</a> stands out in Europe, <a href="https://www.smartkarma.com/entities/xp-inc" target="_blank" data-smartkarma-citation="entities:28619:1" rel="noopener">XP Inc (XP US)</a> is the leader in Brazil but looks over-valued and exposed to increased competition, in our view</li>
<li>Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals</li>
</ul>


The investor rotation into value focusing in on EM and DM banks; our key picks are Credicorp Ltd (BAP US), Turkiye Garanti Bankasi As (GARAN TI), Commercial International Bank (COMI EY) in EM banks, and UniCredit SpA (UCG IM), CaixaBank SA (CABK SM), and BPER Banca S.p.A (BPE IM) in Southern Europe banks
Exchanges and Big Data, the convergence; Intercontinental Exchange (ICE US) is strong on recurring revenues, and both ICE and S&amp;P Global Inc. (SPGI US) should deliver shareholder value creation from transformative M&amp;A
Potential for premium growth and returns in digital payments; we like Nexi SpA (NEXI IM), where we see clear benefits from its M&amp;A, and we see Paypal Holdings (PYPL US) as a core holding
Digital wealth managers focus on the mass affluent; Finecobank Banca Fineco (FBK IM) stands out in Europe, XP Inc (XP US) is the leader in Brazil but looks over-valued and exposed to increased competition, in our view
Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals


FinTech & Financial Investment Themes 2021

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

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global Technology, Discretionary, and Manufacturing Sectors remain leadership -- add exposure/remain overweight. The Financial Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global Technology, Discretionary, and Manufacturing Sectors remain leadership -- add exposure/remain overweight. The Financial Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.

Global Equity Strategy: Santa Claus Rally Underway

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<a href="https://www.smartkarma.com/entities/caixabank-sa" target="_blank" data-smartkarma-citation="entities:21255:1" rel="noopener">CaixaBank SA (CABK SM)</a> 's EGM approved on 3 December the integration with <a href="https://www.smartkarma.com/entities/bankia-sa" target="_blank" data-smartkarma-citation="entities:21252:1" rel="noopener">Bankia SA (BKIA SM)</a> , whilst Bankia's EGM did the same on 1 December.
The merger project establishes an exchange of 0.6845 new CaixaBank shares for each Bankia share. The swap means that CaixaBank shareholders will control 74.2% of the capital of the new entity, and those of Bankia 25.8%. The FROB, which has almost 62% of the current Bankia, will now control 16.1% in the combined entity.
<ul>
<li>Gonzalo Gortázar, CEO of CaixaBank, told shareholders that the integration will be profitable in less than three years.</li>
<li>The entities estimate restructuring costs of around €2,200 mn, equivalent to less than three years of the expected annual gross savings of €770 mn per year from 2023.
<ul>
<li>Roughly 42% of Bankia's cost base at end of FY 2019.</li>
</ul>
</li>
<li>Based on the market consensus, ROTE of the merged entity could rise to 8.2% within two years and EPS could improve 28%.
<ul>
<li>Vs. ROTEs of CaixaBank at 5% and Bankia at 1.9% at Q3 2020.</li>
</ul>
</li>
</ul>
This merger will close and the spread shows it.
<ul>
<li>Gross spread of 1.6% on 7 December.</li>
<li>I recommend keeping an eye on the spread: it often reaches c. 2% gross (c. 8% annualised) during intraday trading.</li>
<li>Recommendation is Long 1 Bankia / short 0.6845 CaixaBank.</li>
</ul>

CaixaBank SA (CABK SM) 's EGM approved on 3 December the integration with Bankia SA (BKIA SM) , whilst Bankia's EGM did the same on 1 December.
The merger project establishes an exchange of 0.6845 new CaixaBank shares for each Bankia share. The swap means that CaixaBank shareholders will control 74.2% of the capital of the new entity, and those of Bankia 25.8%. The FROB, which has almost 62% of the current Bankia, will now control 16.1% in the combined entity.

Gonzalo Gortázar, CEO of CaixaBank, told shareholders that the integration will be profitable in less than three years.
The entities estimate restructuring costs of around €2,200 mn, equivalent to less than three years of the expected annual gross savings of €770 mn per year from 2023.

Roughly 42% of Bankia's cost base at end of FY 2019.


Based on the market consensus, ROTE of the merged entity could rise to 8.2% within two years and EPS could improve 28%.

Vs. ROTEs of CaixaBank at 5% and Bankia at 1.9% at Q3 2020.



This merger will close and the spread shows it.

Gross spread of 1.6% on 7 December.
I recommend keeping an eye on the spread: it often reaches c. 2% gross (c. 8% annualised) during intraday trading.
Recommendation is Long 1 Bankia / short 0.6845 CaixaBank.


CaixaBank - Bankia: Merger Approval at the EGMs, Spread

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Major BEA Shareholder Under Stress In Front Of Merger: CaixaBank SA (CABK.SM), an 17.3% holder of Bank of East Asia’s (23.HK) [BEA] shares, has significant capital concerns. Combined with the acquisition of Bankia (BKIA.SM), pro forma CaixaBank’s (surviving entity) core CET1 target is 11.0%-11.5%. With CaixaBank's restructuring charge only sufficient to fund EUR 1 bn in cost cuts, CaixaBank will need to find additional ways to manufacture capital in order to fund restructuring  - including asset sales, lower dividends, and/or capital raise; and*Expecting A BEA Offload: With an ownership value at EUR 786 mn, a capital charge of EUR 1.6 bn at pro forma CaixaBank under Basel III, the aforementioned solvency constraints at Caixabank, a fundamentally struggling BEA, and a resurgent mainland China, CaixaBank would have to finally be looking for an exit – which would be a massive overhang on the shares of BEA. The key terms of the CaixaBank/BEA Shareholder  Agreement likely cannot be upheld by the former given that its financial problems prevent it from fulfilling its responsibilities.

*Major BEA Shareholder Under Stress In Front Of Merger: CaixaBank SA (CABK.SM), an 17.3% holder of Bank of East Asia’s (23.HK) [BEA] shares, has significant capital concerns. Combined with the acquisition of Bankia (BKIA.SM), pro forma CaixaBank’s (surviving entity) core CET1 target is 11.0%-11.5%. With CaixaBank's restructuring charge only sufficient to fund EUR 1 bn in cost cuts, CaixaBank will need to find additional ways to manufacture capital in order to fund restructuring  - including asset sales, lower dividends, and/or capital raise; and*Expecting A BEA Offload: With an ownership value at EUR 786 mn, a capital charge of EUR 1.6 bn at pro forma CaixaBank under Basel III, the aforementioned solvency constraints at Caixabank, a fundamentally struggling BEA, and a resurgent mainland China, CaixaBank would have to finally be looking for an exit – which would be a massive overhang on the shares of BEA. The key terms of the CaixaBank/BEA Shareholder  Agreement likely cannot be upheld by the former given that its financial problems prevent it from fulfilling its responsibilities.  

Bank of East Asia – Caixa Shake-Out Very Likely

<ul class="">
<li>The new CaixaBank has established the composition of its Board of directors, which will be the largest domestic bank in Spain.</li>
<li> The independent expert (BDO) has endorsed the exchange ratio,
<ul>
<li>
0.6845 new CaixaBank shares for each Bankia share.</li>
</ul>
</li>
<li>The FROB believes that the operation will have a positive effect on the recovery of the aid.</li>
</ul>
I recommend keeping an eye on the spread.
<ul>
<li>It closed on 27 October at 1.66% (gross), not far from the maximum reached on 20 October of 1.73%, and in any case an interesting level for a deal that will certainly close (est. March 2021).
</li>
</ul>
Further catalysts post-merger are (increased) dividend payouts and the exit in the short to medium term of the Kingdom of Spain from the capital of the merged entity.
M&amp;A consolidation seems as a reasonable way to reduce costs and protect profits. These can be among domestic banks or, much to the liking of the ECB, between banks domiciled in different EU countries that share common markets, and would create European champions (see list of banks that appear in many rumours at the end of the note).


The new CaixaBank has established the composition of its Board of directors, which will be the largest domestic bank in Spain.
 The independent expert (BDO) has endorsed the exchange ratio,


0.6845 new CaixaBank shares for each Bankia share.


The FROB believes that the operation will have a positive effect on the recovery of the aid.

I recommend keeping an eye on the spread.

It closed on 27 October at 1.66% (gross), not far from the maximum reached on 20 October of 1.73%, and in any case an interesting level for a deal that will certainly close (est. March 2021).


Further catalysts post-merger are (increased) dividend payouts and the exit in the short to medium term of the Kingdom of Spain from the capital of the merged entity.
M&amp;A consolidation seems as a reasonable way to reduce costs and protect profits. These can be among domestic banks or, much to the liking of the ECB, between banks domiciled in different EU countries that share common markets, and would create European champions (see list of banks that appear in many rumours at the end of the note).

Bankia - CaixaBank: Merger in Progress, Spread Attractive

Spain

CaixaBank accepts deposits and offers banking services.  The bank offers portfolio management services, insurance, investment strategy advice, international banking services, and other specialist financial services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

CaixaBank SA (CABK SM)

FinTech & Financial Investment Themes 2021

Our key 2021 investment themes and ideas in EM and S Europe banks, exchanges and data providers, digital payments companies and digital wealth...

Victor Galliano

Global Equity Strategy: Santa Claus Rally Underway

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns across indexes, and we continue to...

Vermilion Research

CaixaBank - Bankia: Merger Approval at the EGMs, Spread

This merger will close, as the spread shows: it is 1.6% gross on 7 December. It often reaches c. 2% gross (c. 8% annualised) intraday....

Jesus Rodriguez Aguilar

Bank of East Asia – Caixa Shake-Out Very Likely

BANK OF EAST ASIA: Pro Forma CaixaBank Is Under Severe Fundamental Pressure Prior To Its Bankia Merger And In Need of Capital. BEA's Stake Likely...

Thomas J. Monaco

Bankia - CaixaBank: Merger in Progress, Spread Attractive

I recommend keeping an eye on the spread. It closed today (27 October) at a gross 1.66%, an interesting level for a deal that will certainly close...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)