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

Postal Savings Bank of China C / Equity Bottom-Up

<ul>
<li>The China real estate situation remains challenging for banks credit quality, with more real estate developers in financial difficulties, with them either close to, or at default</li>
<li>The macro-economic picture is challenged by China’s zero-Covid policy hurting supply chains, and PBOC is tightening liquidity despite the recent small cuts to reserve requirements and benchmark rates</li>
<li>Before 4Q21 results, the larger cap banks’ credit quality snapshot shows that China Minsheng is very challenged, with Postal Savings Bank and China Merchants in strong positions</li>
</ul>


The China real estate situation remains challenging for banks credit quality, with more real estate developers in financial difficulties, with them either close to, or at default
The macro-economic picture is challenged by China’s zero-Covid policy hurting supply chains, and PBOC is tightening liquidity despite the recent small cuts to reserve requirements and benchmark rates
Before 4Q21 results, the larger cap banks’ credit quality snapshot shows that China Minsheng is very challenged, with Postal Savings Bank and China Merchants in strong positions


China Banks – Credit Quality Snapshot Ahead of 4Q21

Silver Point

Thomas J. Monaco

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

<ul>
<li>Mainland Chinese municipalities and authorities continue to find numerous ways to bone pick the Evergrande carcass without compensation; </li>
<li>Evergrande’s offshore bondholders are now threatening legal enforcement of collateral over the company’s “opaque” debt restructuring process; and </li>
<li>Guangdong province is seeking to segregate Evergrande’s offshore assets in a fire sale to cover what they can of the company’s offshore debt. </li>
</ul>


Mainland Chinese municipalities and authorities continue to find numerous ways to bone pick the Evergrande carcass without compensation; 
Evergrande’s offshore bondholders are now threatening legal enforcement of collateral over the company’s “opaque” debt restructuring process; and 
Guangdong province is seeking to segregate Evergrande’s offshore assets in a fire sale to cover what they can of the company’s offshore debt. 


China Evergrande Group – Vultures Circling

<ul>
<li>Evergrande Is Breaking Down More Rapidly Than Banks Have Kept Up; </li>
<li>Minsheng Has Significant Exposure to Evergrande and Other Problem Developers; and </li>
<li>Minsheng Is Not Insolvent, But It Is Getting There Very Quickly. </li>
</ul>


Evergrande Is Breaking Down More Rapidly Than Banks Have Kept Up; 
Minsheng Has Significant Exposure to Evergrande and Other Problem Developers; and 
Minsheng Is Not Insolvent, But It Is Getting There Very Quickly. 


China Evergrande Group – More Casualties

China Merchants Bank H / Equity Bottom-Up

<ul>
<li>
Competitor Call Reveals Numerous Additional Risks Which Will Weigh On Results. </li>
<li>No Clarity On Go Forward Core Bottom-Line, Especially Gains and Loss Provisions. </li>
<li>Reserve to NPLs Looks Overstated, as WMP and Securities Are Included In Loan Reserves. </li>
</ul>



Competitor Call Reveals Numerous Additional Risks Which Will Weigh On Results. 
No Clarity On Go Forward Core Bottom-Line, Especially Gains and Loss Provisions. 
Reserve to NPLs Looks Overstated, as WMP and Securities Are Included In Loan Reserves. 


China Merchants Bank – Accelerating Risk

<ul>
<li>
Bad To Worse:Under mainland China’s real estate development law, the government has the right to repossess idle land sold to any developer without compensation;</li>
<li>
Demolition Man: Danzhou City is now in on the act, forcing China Evergrande Group (3333.HK) [Evergrande] to demolish 39 buildings for various violations; and</li>
<li>
Banks To Eat This As Well: Without any compensation to Evergrande, mainland Chinese banks no doubt will finally be writing down their exposure on Evergrande's now non-existent buildings.</li>
</ul>



Bad To Worse:Under mainland China’s real estate development law, the government has the right to repossess idle land sold to any developer without compensation;

Demolition Man: Danzhou City is now in on the act, forcing China Evergrande Group (3333.HK) [Evergrande] to demolish 39 buildings for various violations; and

Banks To Eat This As Well: Without any compensation to Evergrande, mainland Chinese banks no doubt will finally be writing down their exposure on Evergrande's now non-existent buildings.


China

China Minsheng Banking Corp., Ltd. operates in commercial banking businesses. The Bank provides deposit, loan, settlement, discount, financial bond issuance, government bond underwriting and trading, letter of credit, bank guarantee, and other related financial services.

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China Minsheng Banking A (600016 CH)

China Banks – Credit Quality Snapshot Ahead of 4Q21

Ahead of the first China larger cap banks to report 4Q21 at month-end, our snapshot of 3Q21 NPL metrics outlines the most challenged - China...

Victor Galliano

China Evergrande Group – Vultures Circling

EVERGRANDE: Offshore bondholders are now threatening legal enforcement of collateral over the company’s “opaque” debt restructuring process, with...

Thomas J. Monaco

China Evergrande Group – More Casualties

EVERGRANDE: Evergrande Is breaking down more rapidly. Minsheng has significant exposure to Evergrande and other problem developers. While Minsheng...

Thomas J. Monaco

China Merchants Bank – Accelerating Risk

CHINA MERCHANTS BANK: A discussion over the use of gains and a drop in loss provisions during 3Q21 would have been a better use of time. CMB’s core...

Thomas J. Monaco

China Evergrande Group – Razing Cain

EVERGRANDE: Danzhou City is forcing Evergrande to demolish 39 buildings for various violations. Mainland Chinese banks no doubt will write down...

Thomas J. Monaco

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