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>We review Citibank’s upcoming division of CitiBanamex and the forthcoming legacy Banamex IPO; given the market’s recent wobbles, we shave down the Banamex IPO valuation</li>
<li>Sector trends to January show continued loan growth; although funding costs have not risen to April, credit costs are worsening, with some evidence of rising NPL ratios</li>
<li>BanBajio generates an ROE of 27%, whilst well capitalized and on very modest multiples; we are now neutral on Banorte, from being cautious, due to its less demanding valuation</li>
</ul>


We review Citibank’s upcoming division of CitiBanamex and the forthcoming legacy Banamex IPO; given the market’s recent wobbles, we shave down the Banamex IPO valuation
Sector trends to January show continued loan growth; although funding costs have not risen to April, credit costs are worsening, with some evidence of rising NPL ratios
BanBajio generates an ROE of 27%, whilst well capitalized and on very modest multiples; we are now neutral on Banorte, from being cautious, due to its less demanding valuation


Banamex Update and Mexican Banks’ April Data – First Look at Early 2Q 2024 Trends

<ul>
<li>We explore Citibank’s upcoming division of CitiBanamex and the forthcoming legacy Banamex IPO; given the market’s premium PBV ratios, this should support the Banamex IPO valuation</li>
<li>Sector trends to January show continued loan growth, but headwinds are building; rising funding costs are eroding credit spreads and credit costs are worsening, even though NPL coverage is healthy</li>
<li>BanBajio generates an ROE of 28%+, whilst highly capitalized and on more modest multiples than Banorte; we stay cautious on Banorte, due to the growing risks to returns and valuation</li>
</ul>


We explore Citibank’s upcoming division of CitiBanamex and the forthcoming legacy Banamex IPO; given the market’s premium PBV ratios, this should support the Banamex IPO valuation
Sector trends to January show continued loan growth, but headwinds are building; rising funding costs are eroding credit spreads and credit costs are worsening, even though NPL coverage is healthy
BanBajio generates an ROE of 28%+, whilst highly capitalized and on more modest multiples than Banorte; we stay cautious on Banorte, due to the growing risks to returns and valuation


Banamex Update and Mexican Banks’ January Data – First Look at Early 1Q 2024 Trends

<ul>
<li>Management’s successful execution to 4Q23 has driven its LTM ROE of 18%+ and ROA of 2.6%; in Brazil, the focus is to grow secured lending and further penetrate high-income retail</li>
<li>In Mexico, management aims to leverage off the deposit base and build its credit business, as well as establishing itself in Colombia; challenges include containing capital consumption and credit delinquency</li>
<li>In Mexico especially, the competitive climate in digital banking is intensifying which puts pressure on customer acquisition costs, costs to serve, and it could drive up credit delinquency risks</li>
</ul>


Management’s successful execution to 4Q23 has driven its LTM ROE of 18%+ and ROA of 2.6%; in Brazil, the focus is to grow secured lending and further penetrate high-income retail
In Mexico, management aims to leverage off the deposit base and build its credit business, as well as establishing itself in Colombia; challenges include containing capital consumption and credit delinquency
In Mexico especially, the competitive climate in digital banking is intensifying which puts pressure on customer acquisition costs, costs to serve, and it could drive up credit delinquency risks


Grupo Financiero Banorte SAB d / Equity Bottom-Up

Grupo Financiero Banorte SAB d (GFNORTEO MF)

<ul>
<li>Banorte delivered a strong close to 2023, with ROE of close to 22% for the group, efficiency ratio of under 40%, healthy core capital adequacy and a low delinquency ratio</li>
<li>There were few amber warnings in the 4Q 2023 figures, with the exception of non-interest costs, especially those relating to IT and digital banking capex, and slightly on funding costs</li>
<li>Management’s 2024 guidance is, in our view, optimistic; we see potential erosion of the net interest margin, structurally higher opex – due mainly to digital competition – and worsening delinquency</li>
</ul>


Banorte delivered a strong close to 2023, with ROE of close to 22% for the group, efficiency ratio of under 40%, healthy core capital adequacy and a low delinquency ratio
There were few amber warnings in the 4Q 2023 figures, with the exception of non-interest costs, especially those relating to IT and digital banking capex, and slightly on funding costs
Management’s 2024 guidance is, in our view, optimistic; we see potential erosion of the net interest margin, structurally higher opex – due mainly to digital competition – and worsening delinquency


Banorte (GFNORTEO MM) – Triple Jeopardy in Play for 2024?

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<ul>
<li>An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.</li>
<li>The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.</li>
<li>Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.</li>
</ul>


An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.
The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.
Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.


Mexico

Grupo Financiero Banorte S.A.B. de C.V. is a financial institution in Mexico. The Company offers banking services, premium banking, wholesale banking, leasing and factoring, warehousing, insurance, pensions and retirement savings.

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Grupo Financiero Banorte SAB d (GFNORTEO MF)

Banamex Update and Mexican Banks’ April Data – First Look at Early 2Q 2024 Trends

Citibank's Banamex faces lower IPO valuation amid market uncertainty; sector trends show loan growth, but rising credit costs. BanBajio shines...

Victor Galliano

Banamex Update and Mexican Banks’ January Data – First Look at Early 1Q 2024 Trends

Sector trends show headwinds credit costs and maybe opex. BanBajio's strong ROE, high capital ratio and modest valuations make it a more attractive...

Victor Galliano

Nubank (NU US): The Challenges for 2024

Nubank Brazil's focus is growing secured lending and high-income retail, while Nu Mexico aims to build the credit book; hurdles include containing...

Victor Galliano

Banorte (GFNORTEO MM) – Triple Jeopardy in Play for 2024?

Banorte had a strong end to 2023, but there are 2024 concerns about potential erosion of net interest margin, structurally higher opex – due...

Victor Galliano

Screening for GEMs: November 2023

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Banamex Update and Mexican Banks’ April Data – First Look at Early 2Q 2024 Trends

​Citibank's Banamex faces lower IPO valuation amid market uncertainty; sector trends show loan growth, but rising credit costs. BanBajio shines...

Victor Galliano

Banamex Update and Mexican Banks’ January Data – First Look at Early 1Q 2024 Trends

Sector trends show headwinds credit costs and maybe opex. BanBajio's strong ROE, high capital ratio and modest valuations make it a more attractive...

Victor Galliano

Nubank (NU US): The Challenges for 2024

Nubank Brazil's focus is growing secured lending and high-income retail, while Nu Mexico aims to build the credit book; hurdles include containing...

Victor Galliano

Banorte (GFNORTEO MM) – Triple Jeopardy in Play for 2024?

​Banorte had a strong end to 2023, but there are 2024 concerns about potential erosion of net interest margin, structurally higher opex – due...

Victor Galliano

Screening for GEMs: November 2023

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

Citibank's Banamex faces lower IPO valuation amid market uncertainty; sector trends show loan growth, but rising credit costs. BanBajio shines...

Banorte had a strong end to 2023, but there are 2024 concerns about potential erosion of net interest margin, structurally higher opex – due...