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.

Thematic (Sector/Industry)

<ul>
<li>BBVA Bancomer delivered the best return on equity (ROE) of the biggest nine Mexican banks to September, at 20%, improving on a MoM basis due largely to a sub 40% efficiency ratio; in terms of ROE to core capital ratio, we identify that BBVA Bancomer and Banorte retain the best position, “working” their healthy levels of core capital harder than their peers</li>
<li>The bank system trends seem healthy, with well controlled NPL ratios and healthy coverage; one core risk to this rosy scenario is, in our view, worse than expected GDP growth leading to an up-tick in consumer delinquencies going forward, which would warrant an increase in cost of risk charges. Another factor that could upset returns is eroding credit margins due to rising funding costs</li>
<li>
<a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-s-a-b-de-c-v" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte (GFNORTEO MF)</a>  and <a href="https://www.smartkarma.com/entities/banco-del-bajio-sa" target="_blank" data-smartkarma-citation="entities:28382:1" rel="noopener">Banco del Bajio SA (BBAJIOO MM)</a> continue to screen better than peers on credit quality metrics to August, with best-in-class combination of low NPL ratios and healthy coverage. Despite its good metrics, we recently turned negative on Banorte, due largely to valuation and increasing competition; we would highlight mid-cap bank BanBajio for its better relative value, and in the context of improving consumer credit quality</li>
</ul>


BBVA Bancomer delivered the best return on equity (ROE) of the biggest nine Mexican banks to September, at 20%, improving on a MoM basis due largely to a sub 40% efficiency ratio; in terms of ROE to core capital ratio, we identify that BBVA Bancomer and Banorte retain the best position, “working” their healthy levels of core capital harder than their peers
The bank system trends seem healthy, with well controlled NPL ratios and healthy coverage; one core risk to this rosy scenario is, in our view, worse than expected GDP growth leading to an up-tick in consumer delinquencies going forward, which would warrant an increase in cost of risk charges. Another factor that could upset returns is eroding credit margins due to rising funding costs

Grupo Financiero Banorte (GFNORTEO MF)  and Banco del Bajio SA (BBAJIOO MM) continue to screen better than peers on credit quality metrics to August, with best-in-class combination of low NPL ratios and healthy coverage. Despite its good metrics, we recently turned negative on Banorte, due largely to valuation and increasing competition; we would highlight mid-cap bank BanBajio for its better relative value, and in the context of improving consumer credit quality


Mexican Banks’ September Data Looks Benign, but Not Without Potential Challenges

Equity Bottom-Up

<ul>
<li>We re-instate BanBajio as our buy in Mexican banks, on compelling valuations and more importantly given its positive catalysts in terms of credit quality adding weight to its re-rating potential</li>
<li>BanBajio’s 4Q 2025 NPL ratio was in line with the peer group, and its cost of risk was the second lowest of the group; it ranks second in the scorecard</li>
<li>BanBajio stands out versus Banorte with its PBV ratio discount of 40%+; it is also trading close to the two standard deviation mark below the discount mean over three years</li>
</ul>


We re-instate BanBajio as our buy in Mexican banks, on compelling valuations and more importantly given its positive catalysts in terms of credit quality adding weight to its re-rating potential
BanBajio’s 4Q 2025 NPL ratio was in line with the peer group, and its cost of risk was the second lowest of the group; it ranks second in the scorecard
BanBajio stands out versus Banorte with its PBV ratio discount of 40%+; it is also trading close to the two standard deviation mark below the discount mean over three years


Mexican Banks – BanBajio Back in the Spotlight

<ul>
<li>We close out our long position on BanBajio as the share price has rallied since July-end and in particular the PE multiple gap has narrowed versus its peers</li>
<li>In terms of PBV ratio, BanBajio’s discount to Banorte has also narrowed and it is now very close to the average discount over the last eighteen months</li>
<li>We expect other fundamental factors to act as a drag on BanBajio’s share price performance versus its peers; its rising cost of risk trends and its eroding net interest margin</li>
</ul>


We close out our long position on BanBajio as the share price has rallied since July-end and in particular the PE multiple gap has narrowed versus its peers
In terms of PBV ratio, BanBajio’s discount to Banorte has also narrowed and it is now very close to the average discount over the last eighteen months
We expect other fundamental factors to act as a drag on BanBajio’s share price performance versus its peers; its rising cost of risk trends and its eroding net interest margin


BanBajio (BBAJIO:MM), Time to Close Out the Long Position

<ul>
<li>We stick with our pairs trade long on BanBajio and short on Banorte; we remove BanRegio from buy, as we do not see it to be so compelling on valuations</li>
<li>BanBajio stands out versus both Banorte and Gentera in terms of its PBV ratio discount; in both cases, BanBajio’s PBV discount is c 40%</li>
<li>Based on our updated propietary scorecard, BanBajio remains top with Inbursa bottom of the ranking</li>
</ul>


We stick with our pairs trade long on BanBajio and short on Banorte; we remove BanRegio from buy, as we do not see it to be so compelling on valuations
BanBajio stands out versus both Banorte and Gentera in terms of its PBV ratio discount; in both cases, BanBajio’s PBV discount is c 40%
Based on our updated propietary scorecard, BanBajio remains top with Inbursa bottom of the ranking


Mexican Banks – BanBajio (BBAJIO:MM) Remains the Value Play

<ul>
<li>BBVA Mexico expanded its premium return on equity of the big nine Mexican banks to 23% to December, and through opex control, it “works” its healthy core capital ratio hard</li>
<li>The bank system trends remain healthy, with additional improvements to NPL ratios and healthy coverage; Banorte and BanBajio screen better than peers on combined credit quality metrics to December</li>
<li>We believe that mid-cap bank BanBajio is good value, and are positive on BBVA for its Mexican exposure; on balance, we remain cautious on Banorte, due largely to valuation</li>
</ul>


BBVA Mexico expanded its premium return on equity of the big nine Mexican banks to 23% to December, and through opex control, it “works” its healthy core capital ratio hard
The bank system trends remain healthy, with additional improvements to NPL ratios and healthy coverage; Banorte and BanBajio screen better than peers on combined credit quality metrics to December
We believe that mid-cap bank BanBajio is good value, and are positive on BBVA for its Mexican exposure; on balance, we remain cautious on Banorte, due largely to valuation


Mexican Banks’ December Data Adds to Positive Trend on Credit Quality, but Lending Spread Eroding

Mexico

Regional SAB de CV provides banking services. The Bank offers deposits, personal loans, e-banking, mortgage lending, auto finance, and other banking services. Regional serves customers in Mexico.

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Regional SAB de CV (RA MM)

Mexican Banks’ September Data Looks Benign, but Not Without Potential Challenges

Mexican banks data to September are healthy, but rising funding costs threaten credit spreads, and any potential GDP slowdown could worsen consumer...

Victor Galliano

Mexican Banks – BanBajio Back in the Spotlight

We re-instate BanBajio as a buy in Mexican banks due to compelling valuations and, more importantly, positive credit quality catalysts; it stands...

Victor Galliano

BanBajio (BBAJIO:MM), Time to Close Out the Long Position

Closing long position on BanBajio due to share price rally, narrowing PE multiple and PBV ratio gap with peers. Share price outlook impacted by...

Victor Galliano

Mexican Banks – BanBajio (BBAJIO:MM) Remains the Value Play

We keep our pairs trade long on scorecard top-rated BanBajio and short on Banorte, removing BanRegio from the buy list. BanBajio's PBV ratio...

Victor Galliano

Mexican Banks’ December Data Adds to Positive Trend on Credit Quality, but Lending Spread Eroding

Credit quality ends the year strong, with evidence of marginal spread erosion in December; we like mid-cap bank BanBajio and BBVA for BBVA Mexico;...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Mexican Banks’ September Data Looks Benign, but Not Without Potential Challenges

Mexican banks data to September are healthy, but rising funding costs threaten credit spreads, and any potential GDP slowdown could worsen consumer...

Victor Galliano

Mexican Banks – BanBajio Back in the Spotlight

We re-instate BanBajio as a buy in Mexican banks due to compelling valuations and, more importantly, positive credit quality catalysts; it stands...

Victor Galliano

BanBajio (BBAJIO:MM), Time to Close Out the Long Position

​Closing long position on BanBajio due to share price rally, narrowing PE multiple and PBV ratio gap with peers. Share price outlook impacted by...

Victor Galliano

Mexican Banks – BanBajio (BBAJIO:MM) Remains the Value Play

​We keep our pairs trade long on scorecard top-rated BanBajio and short on Banorte, removing BanRegio from the buy list. BanBajio's PBV ratio...

Victor Galliano

Mexican Banks’ December Data Adds to Positive Trend on Credit Quality, but Lending Spread Eroding

Credit quality ends the year strong, with evidence of marginal spread erosion in December; we like mid-cap bank BanBajio and BBVA for BBVA Mexico;...

Victor Galliano

Closing long position on BanBajio due to share price rally, narrowing PE multiple and PBV ratio gap with peers. Share price outlook impacted by...

We keep our pairs trade long on scorecard top-rated BanBajio and short on Banorte, removing BanRegio from the buy list. BanBajio's PBV ratio...