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>Itausa holdco trades at a 25% NAV discount, which is more than one standard deviation from the mean; yet we choose to downgrade Itausa to a neutral from a buy</li>
<li>Itaú Unibanco shares, the key contributor to Itausa’s NAV, are trading at a near three-year high PBV ratio; we believe that the bank’s current valuation largely discounts its return potential</li>
<li>We believe that, in turn, the bank’s current premium valuation limits the upside potential for Itausa’s shares; furthermore, the performance of the two shares has decoupled slightly in recent months</li>
</ul>


Itausa holdco trades at a 25% NAV discount, which is more than one standard deviation from the mean; yet we choose to downgrade Itausa to a neutral from a buy
Itaú Unibanco shares, the key contributor to Itausa’s NAV, are trading at a near three-year high PBV ratio; we believe that the bank’s current valuation largely discounts its return potential
We believe that, in turn, the bank’s current premium valuation limits the upside potential for Itausa’s shares; furthermore, the performance of the two shares has decoupled slightly in recent months


Itausa ( ITSA4 BZ): Itaú Unibanco Premium Rating Limits Holding Company Upside

Thematic (Sector/Industry)

<ul>
<li>Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023</li>
<li>Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank</li>
<li>Our key sells are ICICI Bank from India and digital bank Jago from Indonesia</li>
</ul>


Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023
Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank
Our key sells are ICICI Bank from India and digital bank Jago from Indonesia


Banco Do Estado Do Rio Grande / Equity Bottom-Up

<ul>
<li>Bradesco’s re-rating is supported by credit quality improvements and by its solid insurance operations’ returns; we now estimate that the insurance operations account for close to half of group value</li>
<li>We add small cap Banrisul to our coverage and also to our buy list for its deep value qualities and improving returns, with Banrisul ranking top in our proprietary scorecard</li>
<li>Banco do Brasil remains a neutral, due to heightened political risk and worsening credit quality; holdco Itausa remains an attractive vehicle through which to gain equity exposure to Banco Itaú</li>
</ul>


Bradesco’s re-rating is supported by credit quality improvements and by its solid insurance operations’ returns; we now estimate that the insurance operations account for close to half of group value
We add small cap Banrisul to our coverage and also to our buy list for its deep value qualities and improving returns, with Banrisul ranking top in our proprietary scorecard
Banco do Brasil remains a neutral, due to heightened political risk and worsening credit quality; holdco Itausa remains an attractive vehicle through which to gain equity exposure to Banco Itaú


Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

<ul>
<li>We stay negative on Nubank, even after the recent share correction; our rationale is tough competition, especially in Mexico, and worsening credit quality to remain a key risk in Brazil</li>
<li>We believe that the fundamental outlook for Bradesco should improve further, supported by its strong insurance operations; conservatively, we estimate insurance could account for two thirds of group value</li>
<li>Our neutral on Banco do Brasil is due largely to heightened political risk; holding company Itausa is the best indirect vehicle through which to gain equity exposure in Banco Itaú</li>
</ul>


We stay negative on Nubank, even after the recent share correction; our rationale is tough competition, especially in Mexico, and worsening credit quality to remain a key risk in Brazil
We believe that the fundamental outlook for Bradesco should improve further, supported by its strong insurance operations; conservatively, we estimate insurance could account for two thirds of group value
Our neutral on Banco do Brasil is due largely to heightened political risk; holding company Itausa is the best indirect vehicle through which to gain equity exposure in Banco Itaú


Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

Event-Driven

<ul>
<li>Itausa’s equity value is predominantly composed of its core holding stake in big cap Latin American bank Itaú Unibanco whilst it has actively reduced its exposure to wealth tech XP</li>
<li>Yet these two financials together account for over 90% of Itausa’s total equity value, with Itaú accounting for almost the entirety of that value</li>
<li>Itausa is trading at a HoldCo NAV discount of over 25%, which is historically high; currently, Itausa is an excellent vehicle that provides indirect and discounted exposure to Itaú</li>
</ul>


Itausa’s equity value is predominantly composed of its core holding stake in big cap Latin American bank Itaú Unibanco whilst it has actively reduced its exposure to wealth tech XP
Yet these two financials together account for over 90% of Itausa’s total equity value, with Itaú accounting for almost the entirety of that value
Itausa is trading at a HoldCo NAV discount of over 25%, which is historically high; currently, Itausa is an excellent vehicle that provides indirect and discounted exposure to Itaú


Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

Brazil

Itausa SA operates as a investment holding company. The Company, through its subsidiaries, invests in companies in such areas as the financial, as well as the wood paneling, ceramic and metal sanitary, ceramic coatings, clothing, footwear, and gaspipelines. Itausa serves clients worldwide.

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Itausa (ITSA4 BZ)

Itausa ( ITSA4 BZ): Itaú Unibanco Premium Rating Limits Holding Company Upside

Despite trading at a 25% NAV discount, Itausa is downgraded to neutral due to Itaú Unibanco's high PBV ratio which largely discounts its return...

Victor Galliano

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

Victor Galliano

Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Victor Galliano

Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

Itausa's equity value is mainly derived from its stake in Itaú Unibanco, with limited exposure to XP; Itausa trades at a big discount, making it...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Itausa ( ITSA4 BZ): Itaú Unibanco Premium Rating Limits Holding Company Upside

​Despite trading at a 25% NAV discount, Itausa is downgraded to neutral due to Itaú Unibanco's high PBV ratio which largely discounts its return...

Victor Galliano

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Brazil Banks – Stick with Bradesco, Adding Small-Cap Banrisul to the Buy List

​Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

Victor Galliano

Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

​Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Victor Galliano

Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

​Itausa's equity value is mainly derived from its stake in Itaú Unibanco, with limited exposure to XP; Itausa trades at a big discount, making it...

Victor Galliano

Despite trading at a 25% NAV discount, Itausa is downgraded to neutral due to Itaú Unibanco's high PBV ratio which largely discounts its return...

Bradesco is re-rating due to banking recovery and solid insurance arm, Banrisul added to buys for its deep value, Itausa offers exposure to Banco...

Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Itausa's equity value is mainly derived from its stake in Itaú Unibanco, with limited exposure to XP; Itausa trades at a big discount, making it...