European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Banca Monte dei Paschi di Siena / Event-Driven

Banca Monte dei Paschi di Siena (BMPS IM)

<ul>
<li>MPS has launched all-share offers for Banco BPM and Banca Generali, transforming its defence against Intesa into a broader consolidation strategy centred on an independent Italian banking group.</li>
<li>Friday closes imply a −2.7% spread for Banco BPM and +8.0% for Banca Generali, highlighting sharply different execution expectations across the two proposed transactions.</li>
<li>Our scenario analysis values MPS at €12.03/share, 4.0% above spot; Banco BPM alone looks credible, while Banca Generali remains the harder leg given Generali’s control.</li>
</ul>


MPS has launched all-share offers for Banco BPM and Banca Generali, transforming its defence against Intesa into a broader consolidation strategy centred on an independent Italian banking group.
Friday closes imply a −2.7% spread for Banco BPM and +8.0% for Banca Generali, highlighting sharply different execution expectations across the two proposed transactions.
Our scenario analysis values MPS at €12.03/share, 4.0% above spot; Banco BPM alone looks credible, while Banca Generali remains the harder leg given Generali’s control.


Intesa / MPS: Lovaglio Turns Defence Into Expansion

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

<ul>
<li>Below we lay out what we believe is a compelling case to add exposure to European/UK Financial stocks at current levels.</li>
<li>The EURO STOXX 50 has been on an absolute tear since we discussed the bullish implications of a break above 4200, and it now breaking above 2+year resistance at 4400-4415.</li>
<li>Financials are one of the leading Sectors within Europe/UK, and banks, insurance, and financial services are all attractive. We highlight several of our favorite names to buy at current levels</li>
</ul>


Below we lay out what we believe is a compelling case to add exposure to European/UK Financial stocks at current levels.
The EURO STOXX 50 has been on an absolute tear since we discussed the bullish implications of a break above 4200, and it now breaking above 2+year resistance at 4400-4415.
Financials are one of the leading Sectors within Europe/UK, and banks, insurance, and financial services are all attractive. We highlight several of our favorite names to buy at current levels


Buying Financials in Europe/UK; Buy Highlighted: $EUFN, Allianz, Banco Santander, Wise PLC, and More

Product Marketing Manager, Criat

Raghav Chandra Mathur

Product Marketing Manager

Next-Generation Credit Analytics Provider

Criat

Criat specializes in new-generation data-driven credit analytics. Leveraging our industry-leading DeepCredit analytical technologies, we produce daily-updated forward-looking credit assessment and valuation to help financial institutions stay ahead of risks. Coupled with use-case-driven applications, we extract insights, answer questions and enable smarter credit decisions.

Thematic (Sector/Industry)

<ul><li>The European Central Bank’s (ECB) latest interest rate hike of 25 bps in September 2023 has seen its policy rates edge to an all- time high of 4%, increasing pressure on the real economy across the Eurozone and signalling that the region’s fight against inflation is likely to continue for longer and into 2025.</li><li>The threat of an oncoming widespread recession in the Euro area is already flashing signs of red in the credit profiles of the Eurozone’s banking sector, with funding costs for households and corporates likely to remain at record-high levels till the middle of next year.</li><li>As seen from the change in Criat Credit Cycle Index (CCCI) since the ECB began its monetary tightening campaign in July 2022, credit profiles of banks across the Eurozone have been worsening, especially those domiciled in Germany, France, and Italy.</li></ul>

The European Central Bank’s (ECB) latest interest rate hike of 25 bps in September 2023 has seen its policy rates edge to an all- time high of 4%, increasing pressure on the real economy across the Eurozone and signalling that the region’s fight against inflation is likely to continue for longer and into 2025.The threat of an oncoming widespread recession in the Euro area is already flashing signs of red in the credit profiles of the Eurozone’s banking sector, with funding costs for households and corporates likely to remain at record-high levels till the middle of next year.As seen from the change in Criat Credit Cycle Index (CCCI) since the ECB began its monetary tightening campaign in July 2022, credit profiles of banks across the Eurozone have been worsening, especially those domiciled in Germany, France, and Italy.

Credit Profile of Eurozone Banks Worsens as Recession Risk Rises

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.

<ul>
<li>We screen 30 European banks for their core profitability and their credit quality and coverage post 2Q21 results</li>
<li>The aim is to identify banks that are good value and have potential to deliver sustainably higher dividends going forward</li>
<li>We use a number of metrics including pre-provision and post-provision profit, cost of risk and credit quality</li>
<li>We highlight <a href="https://www.smartkarma.com/entities/lloyds-banking-group-plc" target="_blank" data-smartkarma-citation="entities:21009:1" rel="noopener">Lloyds Banking (LLOY LN)</a> and <a href="https://www.smartkarma.com/entities/bankinter-sa" target="_blank" data-smartkarma-citation="entities:21253:1" rel="noopener">Bankinter SA (BKT SM)</a> and stick with <a href="https://www.smartkarma.com/entities/credit-agricole-sa" target="_blank" data-smartkarma-citation="entities:21373:1" rel="noopener">Credit Agricole Sa (ACA FP)</a> and <a href="https://www.smartkarma.com/entities/credit-suisse-group-ag-f4b24f0c-c294-40b3-b491-759f0cb277e9" target="_blank" data-smartkarma-citation="entities:27915:1" rel="noopener">Credit Suisse Group AG (CSGN SW)</a> from the 1Q21 review</li>
<li>We are cautious on <a href="https://www.smartkarma.com/entities/intesa-sanpaolo-spa" target="_blank" data-smartkarma-citation="entities:21200:1" rel="noopener">Intesa Sanpaolo (ISP IM)</a> and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> </li>
<li>Risks to our view include, for our bullish calls, worse than expected cost of risk, opex and fee generation; for our bear calls, better than expected revenue generation with opex control leading to higher dividend prospects</li>
</ul>


We screen 30 European banks for their core profitability and their credit quality and coverage post 2Q21 results
The aim is to identify banks that are good value and have potential to deliver sustainably higher dividends going forward
We use a number of metrics including pre-provision and post-provision profit, cost of risk and credit quality
We highlight Lloyds Banking (LLOY LN) and Bankinter SA (BKT SM) and stick with Credit Agricole Sa (ACA FP) and Credit Suisse Group AG (CSGN SW) from the 1Q21 review
We are cautious on Intesa Sanpaolo (ISP IM) and Standard Chartered (STAN LN) 
Risks to our view include, for our bullish calls, worse than expected cost of risk, opex and fee generation; for our bear calls, better than expected revenue generation with opex control leading to higher dividend prospects


European & UK Banks; Screening for Investment Opportunities

<ul>
<li>We screen thirty European banks, for their dividend yield relative to their dividend pay-out ratios on 2022 consensus estimates, to assess how well is their prospective dividend is covered by forecast profitability</li>
<li>We also screen for attractive valuations, for healthy credit quality metrics and the potential for banks to deliver better returns going forward</li>
<li>In the case of those banks that have built up their provisioning buffers, cost of risk should recede over the coming quarters</li>
<li>We highlight <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc-57298707-4faa-42d6-a353-ab1f6ee92fd4" target="_blank" data-smartkarma-citation="entities:28330:1" rel="noopener">HSBC Holdings PLC (HSBC US)</a> , <a href="https://www.smartkarma.com/entities/banco-bilbao-vizcaya-argentari" target="_blank" data-smartkarma-citation="entities:21251:1" rel="noopener">Banco Bilbao Vizcaya Argentari (BBVA SM)</a>  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>, as well as <a href="https://www.smartkarma.com/entities/abn-amro-group-nv" target="_blank" data-smartkarma-citation="entities:24858:1" rel="noopener">ABN AMRO Group NV (ABN NA)</a>, <a href="https://www.smartkarma.com/entities/credit-agricole-sa" target="_blank" data-smartkarma-citation="entities:21373:1" rel="noopener">Credit Agricole Sa (ACA FP)</a>, <a href="https://www.smartkarma.com/entities/danske-bank-a-s" target="_blank" data-smartkarma-citation="entities:22336:1" rel="noopener">Danske Bank A/S (DANSKE DC)</a> and, as a recovery and contrarian play, <a href="https://www.smartkarma.com/entities/credit-suisse-group-ag-f4b24f0c-c294-40b3-b491-759f0cb277e9" target="_blank" data-smartkarma-citation="entities:27915:1" rel="noopener">Credit Suisse Group AG (CSGN SW)</a>
</li>
<li>Risks to our positive view on our highlighted banks include worse than expected credit quality, as well as weaker than expected revenue generation and higher than expected opex</li>
</ul>


We screen thirty European banks, for their dividend yield relative to their dividend pay-out ratios on 2022 consensus estimates, to assess how well is their prospective dividend is covered by forecast profitability
We also screen for attractive valuations, for healthy credit quality metrics and the potential for banks to deliver better returns going forward
In the case of those banks that have built up their provisioning buffers, cost of risk should recede over the coming quarters
We highlight HSBC Holdings PLC (HSBC US) , Banco Bilbao Vizcaya Argentari (BBVA SM)  and UniCredit SpA (UCG IM), as well as ABN AMRO Group NV (ABN NA), Credit Agricole Sa (ACA FP), Danske Bank A/S (DANSKE DC) and, as a recovery and contrarian play, Credit Suisse Group AG (CSGN SW)

Risks to our positive view on our highlighted banks include worse than expected credit quality, as well as weaker than expected revenue generation and higher than expected opex


European Banks Value Screens – Focus on Dividend Yields and Healthy Dividend Coverage Metrics

France

Credit Agricole S.A. is the lead bank of the Credit Agricole Group.  The Company acts as the central bank of the Group, coordinates its sales and marketing strategy and ensures the liquidity & solvency of each of the Caisses Regionales. Credit Agricole S.A., through its subsidiaries, designs and manages specialized financial products that are distributed primarily by the Caisses Regionales.

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Credit Agricole Sa (ACA FP)

Intesa / MPS: Lovaglio Turns Defence Into Expansion

MPS has changed the shape of the Intesa battle with two new bids of its own. The shareholder arithmetic, deal mechanics and relative spreads now...

Jesus Rodriguez Aguilar

Buying Financials in Europe/UK; Buy Highlighted: $EUFN, Allianz, Banco Santander, Wise PLC, and More

Europe EURO $STOXX 50 in re-emerging as leadership, and Financials $EUFN are leading the charge within Europe/UK. Banks, insurance, and financial...

Vermilion Research

Credit Profile of Eurozone Banks Worsens as Recession Risk Rises

The European Central Bank’s (ECB) latest interest rate hike of 25 bps in September 2023 has seen its policy rates edge to an all- time high of 4%,...

Criat

European & UK Banks; Screening for Investment Opportunities

We screen banks’ core earnings & credit quality to identify banks that are good value & can deliver higher dividends - we like Lloyds, BankInter,...

Victor Galliano

European Banks Value Screens – Focus on Dividend Yields and Healthy Dividend Coverage Metrics

We screen European banks for dividend yield and its sustainability, with other valuation metrics; we highlight HSBC, BBVA, Unicredit, ABN Amro,...

Victor Galliano

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