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

iShares MSCI China ETF / Technical Analysis

<ul>
<li>We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.</li>
<li>We continue to expect rangebound price action in the months ahead on the MSCI ACWI.</li>
<li>And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)</li>
</ul>


We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.
We continue to expect rangebound price action in the months ahead on the MSCI ACWI.
And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)


Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Thematic (Sector/Industry)

Piraeus dedicates itself mainly to corporate credit (64% of loans) but also to the consumer segment (36%), backed by CASA funding (71% of deposits) and wholesale markets. The bank commands a 31% and 29% share, respectively, of Loans and Deposits in Greece. Piraeus is especially strong in Northern Greece where it holds a 40% share of all credit.The bank endured a torrid 2020 with Capitalization coming under renewed pressure and modest progress in bringing Asset Quality under better control : true, Asset Quality is much better than at the NPE peak in 2015. FY20/19 results show adverse fundamental momentum and trends with deterioration in Profitability, in NIM, in headline Asset Quality, in Provisioning, and in Capital Adequacy though Efficiency and Liquidity both improved. Management states that it in phase 3 of a strategic plan which now focuses on digitalization, credit expansion, operating efficiency, and a “radical” NPE clean-up.  Management believes that in this phase with the support of shareholders, the bond market, and the government, it can reach sunnier climbs. The bank’s "Sunrise Plan" targets a single-digit NPE ratio over the next 12 months and a share capital increase of some €1.0 billion. The group plans to achieve a single-digit NPE ratio in the next 12 months and &lt; 3% in the medium term. The aim is to get NPEs to about €3.6 billion in the next 12 months and to €1 billion in the medium term from €22.5 billion at FY2020. The NPE reduction plan depends on securitization and derecognition of NPEs with an estimated gross book value of up to €19 billion, including the Phoenix and Vega projects. The incremental NPE securitizations, Sunrise 1 and Sunrise 2, totaling €7 billion and €4 billion, respectively, will be carried out using Greece's Hellenic Asset Protection Scheme 2. Senior notes of roughly €6.5 billion from the “HAPS” transactions will be retained by Piraeus Bank, while it may distribute the majority of the mezzanine and junior notes to shareholders of Piraeus Financial Holdings. The group also intends to sell up to €1.5 billion of NPEs outside “HAPS” to further de-risking initiatives. To complement the aforementioned €1 billion non-preemptive fully marketed offering of shares, the group also plans to issue as much as €600 million of Additional Tier 1 bonds. Piraeus Bank SA also agreed to carve out and sell its merchant acquiring business unit to Euronet Worldwide for €300 million, which will also bolster capital further. Looking ahead, Piraeus is shooting for a CAR of &gt; 16% and a ROTE of &gt; 10%.<div class="content-highlight">A FV of 1% and a PBV of 0.05x are in the global bargain basement. The bank has a bottom quartile PH Score™ (2.2). News flow on a dilutive capital raise have reduced RSI to quite low levels and share price underperformance versus better quality peers is now extreme. If management executes its plan, shares in this rich franchise will be worthwhile at some stage this year with a long-term patient mindset.</div>

Piraeus dedicates itself mainly to corporate credit (64% of loans) but also to the consumer segment (36%), backed by CASA funding (71% of deposits) and wholesale markets. The bank commands a 31% and 29% share, respectively, of Loans and Deposits in Greece. Piraeus is especially strong in Northern Greece where it holds a 40% share of all credit.The bank endured a torrid 2020 with Capitalization coming under renewed pressure and modest progress in bringing Asset Quality under better control : true, Asset Quality is much better than at the NPE peak in 2015. FY20/19 results show adverse fundamental momentum and trends with deterioration in Profitability, in NIM, in headline Asset Quality, in Provisioning, and in Capital Adequacy though Efficiency and Liquidity both improved. Management states that it in phase 3 of a strategic plan which now focuses on digitalization, credit expansion, operating efficiency, and a “radical” NPE clean-up.  Management believes that in this phase with the support of shareholders, the bond market, and the government, it can reach sunnier climbs. The bank’s "Sunrise Plan" targets a single-digit NPE ratio over the next 12 months and a share capital increase of some €1.0 billion. The group plans to achieve a single-digit NPE ratio in the next 12 months and &lt; 3% in the medium term. The aim is to get NPEs to about €3.6 billion in the next 12 months and to €1 billion in the medium term from €22.5 billion at FY2020. The NPE reduction plan depends on securitization and derecognition of NPEs with an estimated gross book value of up to €19 billion, including the Phoenix and Vega projects. The incremental NPE securitizations, Sunrise 1 and Sunrise 2, totaling €7 billion and €4 billion, respectively, will be carried out using Greece's Hellenic Asset Protection Scheme 2. Senior notes of roughly €6.5 billion from the “HAPS” transactions will be retained by Piraeus Bank, while it may distribute the majority of the mezzanine and junior notes to shareholders of Piraeus Financial Holdings. The group also intends to sell up to €1.5 billion of NPEs outside “HAPS” to further de-risking initiatives. To complement the aforementioned €1 billion non-preemptive fully marketed offering of shares, the group also plans to issue as much as €600 million of Additional Tier 1 bonds. Piraeus Bank SA also agreed to carve out and sell its merchant acquiring business unit to Euronet Worldwide for €300 million, which will also bolster capital further. Looking ahead, Piraeus is shooting for a CAR of &gt; 16% and a ROTE of &gt; 10%.A FV of 1% and a PBV of 0.05x are in the global bargain basement. The bank has a bottom quartile PH Score™ (2.2). News flow on a dilutive capital raise have reduced RSI to quite low levels and share price underperformance versus better quality peers is now extreme. If management executes its plan, shares in this rich franchise will be worthwhile at some stage this year with a long-term patient mindset.

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>In our Southern Europe bank screens, we look for attractive valuations, core capital strength and constructive signals on credit quality</li>
<li>In Italy, we are positive on <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a> , which is attractive on valuations, credit quality and capital as well as <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> on valuations and NPL coverage</li>
<li>In Spain, <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> screens well on valuation, NPL coverage and the capital ratio will get a boost post US Bancshares disposal; we are also positive on the Caixabank-Bankia merger</li>
<li>
<a href="https://www.smartkarma.com/entities/banco-comercial-portugues-sa" target="_blank" data-smartkarma-citation="entities:21358:1" rel="noopener">Banco Comercial Portugues Sa (BCP PL)</a> is one to watch in Portugal, while we believe that the Greek banks still have a way to go on balance sheet de-risking</li>
<li>Risks to our positive views on the recommended Italian and Spanish banks include a reversal of investor sentiment into a more “risk off” mode, including investors shunning value shares</li>
</ul>


In our Southern Europe bank screens, we look for attractive valuations, core capital strength and constructive signals on credit quality
In Italy, we are positive on UniCredit SpA (UCG IM) , which is attractive on valuations, credit quality and capital as well as BPER Banca S.p.A (BPE IM) on valuations and NPL coverage
In Spain, Banco Bilbao Vizcaya Argentari (BBVA SM) screens well on valuation, NPL coverage and the capital ratio will get a boost post US Bancshares disposal; we are also positive on the Caixabank-Bankia merger

Banco Comercial Portugues Sa (BCP PL) is one to watch in Portugal, while we believe that the Greek banks still have a way to go on balance sheet de-risking
Risks to our positive views on the recommended Italian and Spanish banks include a reversal of investor sentiment into a more “risk off” mode, including investors shunning value shares


Southern Europe Bank Screens; Picks for 2021

In this insight, we take a look at Greek banks and place them in the context of an improving pre-COVID 19 economy, a supportive post-COVID-19 monetary system, and a potential game-changer in "HAPS", a GACS equivalent (Italy's Guarantee on Securitization of Bank Non-Performing Loans).COVID-19 comes as a cruel blow to all of us but Greece can feel especially aggrieved after taking measures at enormous cost "to put its house in order" during a torturous decade of economic and social depression. With the opening of the economy and dismantling of  bureaucracy by New Democracy,  green shoots were appearing and confidence was on the rise prior to COVID-19 while NPL-ridden banks were preparing strategies to use "HAPS", the Hellenic Asset Protection Scheme, modeled on GACS in Italy in order to strengthen their suffocated Balance Sheets. "HAPS" requires demand for risky assets and the latest global risk-asset car crash is just what the banks did not want.As always, we look at things through a valuation lens. The market is pricing in that "HAPS" does not get done in full or at least is very partially excecuted and/or Greek banks will require more capital from somewhere: in recent years, they have been active users of the international debt markets. We believe that this may be too pessimistic though delays are probable. The key known unknown is of course COVID-19 and the duration of economic lockdown. Greek banks are cheap: as you would expect. However, valuation is accompanied by fundamental progression - a good sign- though we stress earnings quality could be better.<div class="content-highlight">On a Franchise Valuation, Greek Banks are lowly rated.</div>    Piraeus Bank 1%    National Bank of Greece 2%    Alpha Bank 2%    Eurobank 3%<div class="content-highlight">On a P/B basis, Greek Banks are lowly rated.</div>    This shows a deep risk of growth and growth of risk.       Piraeus Bank 0.1x    Alpha Bank 0.1x    National Bank of Greece 0.2x    Eurobank 0.2x<div class="content-highlight">PH Score™: rankings are positive in general</div>Piraeus 10Eurobank 7.3Alpha 7.2National Bank of Greece 4.6<div class="content-highlight">The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </div>

In this insight, we take a look at Greek banks and place them in the context of an improving pre-COVID 19 economy, a supportive post-COVID-19 monetary system, and a potential game-changer in "HAPS", a GACS equivalent (Italy's Guarantee on Securitization of Bank Non-Performing Loans).COVID-19 comes as a cruel blow to all of us but Greece can feel especially aggrieved after taking measures at enormous cost "to put its house in order" during a torturous decade of economic and social depression. With the opening of the economy and dismantling of  bureaucracy by New Democracy,  green shoots were appearing and confidence was on the rise prior to COVID-19 while NPL-ridden banks were preparing strategies to use "HAPS", the Hellenic Asset Protection Scheme, modeled on GACS in Italy in order to strengthen their suffocated Balance Sheets. "HAPS" requires demand for risky assets and the latest global risk-asset car crash is just what the banks did not want.As always, we look at things through a valuation lens. The market is pricing in that "HAPS" does not get done in full or at least is very partially excecuted and/or Greek banks will require more capital from somewhere: in recent years, they have been active users of the international debt markets. We believe that this may be too pessimistic though delays are probable. The key known unknown is of course COVID-19 and the duration of economic lockdown. Greek banks are cheap: as you would expect. However, valuation is accompanied by fundamental progression - a good sign- though we stress earnings quality could be better.On a Franchise Valuation, Greek Banks are lowly rated.    Piraeus Bank 1%    National Bank of Greece 2%    Alpha Bank 2%    Eurobank 3%On a P/B basis, Greek Banks are lowly rated.    This shows a deep risk of growth and growth of risk.       Piraeus Bank 0.1x    Alpha Bank 0.1x    National Bank of Greece 0.2x    Eurobank 0.2xPH Score™: rankings are positive in generalPiraeus 10Eurobank 7.3Alpha 7.2National Bank of Greece 4.6The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 

Greek Banks: It's All About "HAPS" And that Requires Risk Appetite

<ul>
<li>High liquidity in markets and improving investor risk appetite appear to be driving the rotation into equities and especially value stocks, which includes European banks and financials</li>
<li>We also believe that the past years of tightening regulation, especially banks capital, is now going into reverse, with conduct-related fines imposed on the sector having declined sharply</li>
<li>We update our value screens on European banks in this report, adding another screen for dividend cover; among the European banks, we look for value and sustainable dividend yield based on these screens</li>
<li>We believe that <a href="https://www.smartkarma.com/entities/banco-bpm-spa" target="_blank" data-smartkarma-citation="entities:28121:1" rel="noopener">Banco BPM SpA (BAMI IM)</a>, <a href="https://www.smartkarma.com/entities/banca-popolare-dell-emilia-rom" target="_blank" data-smartkarma-citation="entities:21165:1" rel="noopener">Banca Popolare Dell'Emilia Rom (BPE IM)</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> stand out among our core coverage; <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/banco-de-sabadell-sa" target="_blank" data-smartkarma-citation="entities:21295:1" rel="noopener">Banco De Sabadell Sa (SAB SM)</a> in Spain and <a href="https://www.smartkarma.com/entities/banco-comercial-portugues-sa" target="_blank" data-smartkarma-citation="entities:21358:1" rel="noopener">Banco Comercial Portugues Sa (BCP PL)</a> in Portugal screen well</li>
<li>Outside of our core coverage, we highlight <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> given its value, dividend yield and relatively healthy cover; also <a href="https://www.smartkarma.com/entities/bank-of-ireland" target="_blank" data-smartkarma-citation="entities:21838:1" rel="noopener">Bank of Ireland (BKIR ID)</a> and, despite its lack of dividend yield, <a href="https://www.smartkarma.com/entities/eurobank-ergasias-sa" target="_blank" data-smartkarma-citation="entities:22604:1" rel="noopener">Eurobank Ergasias Sa (EUROB GA)</a> is one to watch in Greece</li>
<li>Risks to our thesis are a protracted"risk-off" period in markets, potentially driven by heightened increased trade deal frictions, low GDP growth and increased geo-political tensions that drive investors away from equities into more traditional safe haven assets</li>
</ul>


High liquidity in markets and improving investor risk appetite appear to be driving the rotation into equities and especially value stocks, which includes European banks and financials
We also believe that the past years of tightening regulation, especially banks capital, is now going into reverse, with conduct-related fines imposed on the sector having declined sharply
We update our value screens on European banks in this report, adding another screen for dividend cover; among the European banks, we look for value and sustainable dividend yield based on these screens
We believe that Banco BPM SpA (BAMI IM), Banca Popolare Dell'Emilia Rom (BPE IM) and UniCredit SpA (UCG IM) stand out among our core coverage; Banco Bilbao Vizcaya Argentari (BBVA SM) and Banco De Sabadell Sa (SAB SM) in Spain and Banco Comercial Portugues Sa (BCP PL) in Portugal screen well
Outside of our core coverage, we highlight Danske Bank A/S (DANSKE DC) given its value, dividend yield and relatively healthy cover; also Bank of Ireland (BKIR ID) and, despite its lack of dividend yield, Eurobank Ergasias Sa (EUROB GA) is one to watch in Greece
Risks to our thesis are a protracted"risk-off" period in markets, potentially driven by heightened increased trade deal frictions, low GDP growth and increased geo-political tensions that drive investors away from equities into more traditional safe haven assets


European Banks: Screening for Value January 2020

Greece

Eurobank Ergasias SA attracts deposits and offers commercial and retail banking services.  The Bank offers mortgage and automobile loans, capital markets and treasury services, manages mutual funds, and offers credit cards and insurance services.

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Eurobank Ergasias Sa (EUROB GA)

Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

We remain neutral on global equities $ACWI and expect rangebound price action in the months (possibly year) ahead. Specific $ACWI trading range we...

Vermilion Research

Piraeus: Goodbye 2020, Hello Sunrise

Piraeus struggled in 2020 and news of a capital increase have clobbered shares. We do though see deep value over the long-term - if they execute on...

Paul Hollingworth

Southern Europe Bank Screens; Picks for 2021

As 2021 Southern Europe bank picks, Unicredit, BPER and BBVA, Caixaban-Bankia stand out in terms of valuation, capital strength and credit quality

Victor Galliano

Greek Banks: It's All About "HAPS" And that Requires Risk Appetite

In this insight, we take a look at Greek banks and place them in the context of an improving pre-COVID 19 economy, a supportive post-COVID-19...

Paul Hollingworth

European Banks: Screening for Value January 2020

High liquidity in markets and improving investor risk appetite appear to be driving the rotation into equities and especially value stocks, which...

Victor Galliano

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