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 apply our weighted scorecard with metrics adapted for the EM neobanks; Kakaobank screens best whilst Bank Jago is the bottom marker</li>
<li>Despite this, we believe that the most compelling investment ideas are in Brazilian neobanks in the form of a pairs trade, and we add qualitative factors to the investment thesis</li>
<li>We recommend a long on Inter, the second best rated neobank on the scorecard, against a short on Nubank, the latter having the second worst rating on the scorecard</li>
</ul>


We apply our weighted scorecard with metrics adapted for the EM neobanks; Kakaobank screens best whilst Bank Jago is the bottom marker
Despite this, we believe that the most compelling investment ideas are in Brazilian neobanks in the form of a pairs trade, and we add qualitative factors to the investment thesis
We recommend a long on Inter, the second best rated neobank on the scorecard, against a short on Nubank, the latter having the second worst rating on the scorecard


EM Neobanks – Pairs Trade; Long Inter and Short Nubank

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>LATAM remains a core and consensus overweight among active EM managers, with 85% of funds positioned ahead of the MSCI EM benchmark</li>
<li>LATAM exposure is concentrated in Brazil, Mexico, and Argentina, which together make up 90% of the region’s allocation.</li>
<li>Banorte remains the most widely held stock in the region, with Embraer SA and Gentera staging notable recoveries from the low positioning levels seen in 2021 and 2022.</li>
</ul>


LATAM remains a core and consensus overweight among active EM managers, with 85% of funds positioned ahead of the MSCI EM benchmark
LATAM exposure is concentrated in Brazil, Mexico, and Argentina, which together make up 90% of the region’s allocation.
Banorte remains the most widely held stock in the region, with Embraer SA and Gentera staging notable recoveries from the low positioning levels seen in 2021 and 2022.


LATAM:  The Conviction Overweight in a Benchmark-Driven World

<ul>
<li>We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate</li>
<li>We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations</li>
<li>Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations</li>
</ul>


We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate
We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations
Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations


EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

Equity Capital Markets

<ul>
<li>The sharp run-up in the share price since its IPO does not, in our view, mean that Rakuten Bank’s rally is done; there is further fundamental justification for a re-rating</li>
<li>Rakuten Bank trades on a LTM PE multiple of 14.4x, LTM PBV ratio of 1.6x and an ROE of 13.2%, which is the best return of our neobank peers</li>
<li>Relative to its peer group, Rakuten Bank has premium long-run growth prospects; conservatively estimating Rakuten Bank’s growth (8% pa), implies a PEG ratio in the range of 1.2x to 1.3x</li>
</ul>


The sharp run-up in the share price since its IPO does not, in our view, mean that Rakuten Bank’s rally is done; there is further fundamental justification for a re-rating
Rakuten Bank trades on a LTM PE multiple of 14.4x, LTM PBV ratio of 1.6x and an ROE of 13.2%, which is the best return of our neobank peers
Relative to its peer group, Rakuten Bank has premium long-run growth prospects; conservatively estimating Rakuten Bank’s growth (8% pa), implies a PEG ratio in the range of 1.2x to 1.3x


Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations

<ul>
<li>Rakuten Bank’s IPO will add an attractively valued Japanese neobank to the globally listed neobank universe; furthermore, the Rakuten Group ecosystem is a powerful tool for customer acquisition and retention</li>
<li>On efficiency metrics, Rakuten Bank scores well versus its key domestic peers as well as global comparables; Rakuten Group companies act as a key conduit for new clients</li>
<li>At the announced issue price of ¥1,400, Rakuten Bank’s PBV ratio implies an attractive 25% discount to its core Japanese peer SBI Sumishin Net Bank, for similar ROE</li>
</ul>


Rakuten Bank’s IPO will add an attractively valued Japanese neobank to the globally listed neobank universe; furthermore, the Rakuten Group ecosystem is a powerful tool for customer acquisition and retention
On efficiency metrics, Rakuten Bank scores well versus its key domestic peers as well as global comparables; Rakuten Group companies act as a key conduit for new clients
At the announced issue price of ¥1,400, Rakuten Bank’s PBV ratio implies an attractive 25% discount to its core Japanese peer SBI Sumishin Net Bank, for similar ROE


Rakuten Bank (5838 JP) – A Keenly Priced Quality Addition to the Global Neobanks Universe

Brazil

NU Holdings Ltd. of the Cayman Islands operates as a holding company. The Company, through its subsidiaries, provides loans and digital banking services, as well as issues, administrates, processes, and transfers payments to post-paid credit cards and equity investments in other entities. NU Holdings serves clients worldwide.

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NU Holdings (NU US)

EM Neobanks – Pairs Trade; Long Inter and Short Nubank

Brazilian neobanks present compelling opportunities, with Inter recommended as a long and Nubank as a short based on their weighted scorecard...

Victor Galliano

LATAM: The Conviction Overweight in a Benchmark-Driven World

LATAM remains a core and consensus overweight among active EM managers, with 85% of funds positioned ahead of the MSCI EM benchmark

Steven Holden

EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

KakaoBank raised to buy for its firm business niche, its positive banking and capital ratios; Inter is also a buy for its undemanding valuations...

Victor Galliano

Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations

Rakuten Bank’s mix of relative value metrics and premium growth potential are clear positive drivers for its further re-rating potential; company...

Victor Galliano

Rakuten Bank (5838 JP) – A Keenly Priced Quality Addition to the Global Neobanks Universe

Rakuten Bank's IPO is priced to go; issue price PBV ratio implies an attractive 25% discount to core Japanese peer SBI Sumishin Net Bank, for...

Victor Galliano

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