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>Among EM banks, our top picks are Sberbank in Russia, Banco do Brasil and HDFC Bank in India; we are negative on recent IPO Nubank due to inflated market expectations</li>
<li>Our top picks for 2022 are BBVA and Banco BPM for Southern Europe banks. In Exchanges, we are positive on B3 of Brazil and SGX</li>
<li>In payments, we like Mastercard and Pagseguro, but we are negative on Paytm; we see BTG Pactual as an attractive pick and winner in the digital wealth managers and brokers</li>
</ul>


Among EM banks, our top picks are Sberbank in Russia, Banco do Brasil and HDFC Bank in India; we are negative on recent IPO Nubank due to inflated market expectations
Our top picks for 2022 are BBVA and Banco BPM for Southern Europe banks. In Exchanges, we are positive on B3 of Brazil and SGX
In payments, we like Mastercard and Pagseguro, but we are negative on Paytm; we see BTG Pactual as an attractive pick and winner in the digital wealth managers and brokers


2022 High Conviction Ideas in FinTech & Financials

Equity Capital Markets

<ul>
<li>Nubank has revised down its IPO pricing range by close to 20% to USD41.5bn, driven largely by challenging market conditions; this verifies our negative valuation opinion in our previous report</li>
<li>The revised prospectus includes Softbank as Nubank’s new potential cornerstone investor; this is putting pressure on the shares of digital challenger Banco Inter, in which Softbank has a 15% stake</li>
<li>The revised Nubank pricing range narrows the valuation gap with other digital and commercial banks; yet Nubank’s premium valuations need to be justified by medium term super premium earnings growth</li>
</ul>


Nubank has revised down its IPO pricing range by close to 20% to USD41.5bn, driven largely by challenging market conditions; this verifies our negative valuation opinion in our previous report
The revised prospectus includes Softbank as Nubank’s new potential cornerstone investor; this is putting pressure on the shares of digital challenger Banco Inter, in which Softbank has a 15% stake
The revised Nubank pricing range narrows the valuation gap with other digital and commercial banks; yet Nubank’s premium valuations need to be justified by medium term super premium earnings growth


Nubank’s Revised IPO Pricing Range, and the Emergence of a New Potential Cornerstone Investor

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<ul><li>The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009.</li><li>Panic sellers, aided by algorithms, have sunk this Brazilian fintech company down to levels not seen since its IPO.</li><li>First, a little about Stone (STNE). They provide financial technology to merchants to conduct electronic commerce across in-store, online, and mobile channels in Brazil.</li></ul>

The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009.Panic sellers, aided by algorithms, have sunk this Brazilian fintech company down to levels not seen since its IPO.First, a little about Stone (STNE). They provide financial technology to merchants to conduct electronic commerce across in-store, online, and mobile channels in Brazil.

Did the Collapse of Stone (STNE) Create an Opportunity for Value Investors?

<ul>
<li>Nubank, the leading digital native bank in Brazil and Latin America, by number of customers, has filed for an IPO with an indication valuation in excess of USD50bn </li>
<li>Nubank is strong in terms of its key fintech metrics and trends, such as revenue per user relative to its cost to serve and it has low customer acquisition costs </li>
<li>Nubank is a clear leading fintech benchmark; yet its challenges are its super-premium valuation in the face of unsettled markets, and the delivery of fast growth whilst controlling loan delinquency</li>
</ul>


Nubank, the leading digital native bank in Brazil and Latin America, by number of customers, has filed for an IPO with an indication valuation in excess of USD50bn 
Nubank is strong in terms of its key fintech metrics and trends, such as revenue per user relative to its cost to serve and it has low customer acquisition costs 
Nubank is a clear leading fintech benchmark; yet its challenges are its super-premium valuation in the face of unsettled markets, and the delivery of fast growth whilst controlling loan delinquency


Nubank Pre-IPO Research: Priced for Perfection?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a> continues to grow its digital customer base, and remains the second largest digital commercial bank in Brazil by digital accounts</li>
<li>Yet 3Q21 results showed that customer acquisition costs increased further, that Inter is losing investment assets and that Inter’s capital absorption post the latest equity follow-on is set to be high</li>
<li>In addition, the largest Brazilian digital Nubank has filed for an IPO which impacts Banco Inter negatively, as Nubank’s listing will erode Inter’s scarcity value on the equity market and the IPO allows Nubank to raise fresh equity to fund its growth</li>
<li>Banco Inter is in partnership in the payments arena with its now cornerstone shareholder StoneCo; StoneCo’s main supplier of POS terminals, PAX Global Technology, saw its Florida offices raided by the FBI earlier this week, which is clearly negative for StoneCo and by extension Banco Inter</li>
<li>We remain negative on Inter, as we believe that Banco Inter is still stretched on valuations, despite the steady share price de-rating since July, and the fundamental headwinds to returns that Inter faces are real due to intensifying competition, not least with Nubank’s planned IPO</li>
<li>Risks to our negative view on Banco Inter include it achieving better than expects customer acquisition costs and higher benchmark rates in Brazil boosting its net interest income</li>
</ul>



Banco Inter SA (BIDI11 BZ) continues to grow its digital customer base, and remains the second largest digital commercial bank in Brazil by digital accounts
Yet 3Q21 results showed that customer acquisition costs increased further, that Inter is losing investment assets and that Inter’s capital absorption post the latest equity follow-on is set to be high
In addition, the largest Brazilian digital Nubank has filed for an IPO which impacts Banco Inter negatively, as Nubank’s listing will erode Inter’s scarcity value on the equity market and the IPO allows Nubank to raise fresh equity to fund its growth
Banco Inter is in partnership in the payments arena with its now cornerstone shareholder StoneCo; StoneCo’s main supplier of POS terminals, PAX Global Technology, saw its Florida offices raided by the FBI earlier this week, which is clearly negative for StoneCo and by extension Banco Inter
We remain negative on Inter, as we believe that Banco Inter is still stretched on valuations, despite the steady share price de-rating since July, and the fundamental headwinds to returns that Inter faces are real due to intensifying competition, not least with Nubank’s planned IPO
Risks to our negative view on Banco Inter include it achieving better than expects customer acquisition costs and higher benchmark rates in Brazil boosting its net interest income


Banco Inter (BIDI11 BZ):  Tough 3Q21, No Let up on the Horizon

Brazil

Inter & Co, Inc. operates as an investment holding company. The Company, through its subsidiaries, serves customers in Brazil.

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Inter & Co (INTR US)

2022 High Conviction Ideas in FinTech & Financials

Our 2022 high conviction ideas include buys on Sberbank, Banco do Brasil and HDFC Bank, as well as BBVA, Banco BPM, B3, SGX, Mastercard and...

Victor Galliano

Nubank’s Revised IPO Pricing Range, and the Emergence of a New Potential Cornerstone Investor

Post the price reduction, the jury is still out on the after-market in Nubank shares; Banco Inter is nearing attractive value territory even if...

Victor Galliano

Did the Collapse of Stone (STNE) Create an Opportunity for Value Investors?

The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009. Panic...

Stock Telegram

Nubank Pre-IPO Research: Priced for Perfection?

Nubank warrants a premium IPO valuation to other banks, but one that better accounts for the unsettled state of global markets and the potential...

Victor Galliano

Banco Inter (BIDI11 BZ): Tough 3Q21, No Let up on the Horizon

We stay negative on Banco Inter due to the intensifying competition among Brazilian digital and legacy banks, with the prospective Nubank IPO...

Victor Galliano

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