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 update our proprietary scorecard and many of our charts based on the latest data; despite the recent lack of BoJ rate hikes, interest rate spreads are widening</li>
<li>The JGB yield curve has continued to steepen, which is constructive for Japanese banks; in addition, market lending rates to June continue to rise faster than deposit rates</li>
<li>We stick with our focus on two core attributes; gearing to higher interest rates and cross-holdings to market capitalization keeping Resona, Mizuho, Shizuoka and Kyoto on our list of buys</li>
</ul>


We update our proprietary scorecard and many of our charts based on the latest data; despite the recent lack of BoJ rate hikes, interest rate spreads are widening
The JGB yield curve has continued to steepen, which is constructive for Japanese banks; in addition, market lending rates to June continue to rise faster than deposit rates
We stick with our focus on two core attributes; gearing to higher interest rates and cross-holdings to market capitalization keeping Resona, Mizuho, Shizuoka and Kyoto on our list of buys


Japanese Big Cap Banks – Stick with Our Key Positive Picks

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Index Rebalance

<ul>
<li>A couple of years ago, <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> announced they would spin off <a href="https://www.smartkarma.com/entities/sony-financial-holdings-inc" target="_blank" data-smartkarma-citation="entities:564:1" rel="noopener">Sony Financial Holdings (8729 JP)</a> (called Sony Financial Group Inc). That spinoff is due in Sep-2025.</li>
<li>The extra capital required for a tech/industrial to hold the financial business is significant, but some of the other reasons Sony has offered are just management-speak hogwash.</li>
<li>The problem? It creates a new event in the Nikkei 225 paradigm for which there was no rule. Now the Nikkei has proposed a rule. It isn't perfect.</li>
</ul>


A couple of years ago, Sony Corp (6758 JP) announced they would spin off Sony Financial Holdings (8729 JP) (called Sony Financial Group Inc). That spinoff is due in Sep-2025.
The extra capital required for a tech/industrial to hold the financial business is significant, but some of the other reasons Sony has offered are just management-speak hogwash.
The problem? It creates a new event in the Nikkei 225 paradigm for which there was no rule. Now the Nikkei has proposed a rule. It isn't perfect.


Nikkei 225 Proposal for Dealing With Sony's (6758) Sony Finl Spinoff - A Non-Event but TOPIX Isn't

<ul>
<li>The Bank of Japan left the short-term interest rate unchanged, but the governor stated that the tapering of JGB buying will continue, albeit with an eye on market stability</li>
<li>This implies that the JGB yield curve is likely to continue steepening going forward, which is constructive for Japanese banks; in addition, market lending rates to April continue to rise</li>
<li>We reassert buys on Resona, Mizuho, Shizuoka and Kyoto aided by our proprietary scorecard, and based on two core attributes; gearing to higher interest rates and cross-holdings to market capitalization</li>
</ul>


The Bank of Japan left the short-term interest rate unchanged, but the governor stated that the tapering of JGB buying will continue, albeit with an eye on market stability
This implies that the JGB yield curve is likely to continue steepening going forward, which is constructive for Japanese banks; in addition, market lending rates to April continue to rise
We reassert buys on Resona, Mizuho, Shizuoka and Kyoto aided by our proprietary scorecard, and based on two core attributes; gearing to higher interest rates and cross-holdings to market capitalization


Japanese Big Cap Banks – Key Fundamental Tailwinds Drive Our Positive Picks

Event-Driven

<ul>
<li>Today after the close, <a href="https://www.smartkarma.com/entities/seven-bank-ltd" target="_blank" data-smartkarma-citation="entities:16063:1" rel="noopener">Seven Bank Ltd (8410 JP)</a> announced a MASSIVE ToSTNeT-3 transaction to buy back up to 200,000,000 shares (17.0% of shares out) for ¥52.4bn. Tomorrow AM. </li>
<li>There is a complex iterative calculation on the part of Seven Eleven Japan to figure out how many shares they should put into the buyback.</li>
<li>I see a minimum buyback of 10.8%. 17% would be great. But there is a potential issue on the back end of which investors should be aware.</li>
</ul>


Today after the close, Seven Bank Ltd (8410 JP) announced a MASSIVE ToSTNeT-3 transaction to buy back up to 200,000,000 shares (17.0% of shares out) for ¥52.4bn. Tomorrow AM. 
There is a complex iterative calculation on the part of Seven Eleven Japan to figure out how many shares they should put into the buyback.
I see a minimum buyback of 10.8%. 17% would be great. But there is a potential issue on the back end of which investors should be aware.


[Japan Event] Seven Bank (8410) To Buy Back Up to 17.0% of Shares Out Tomorrow

<ul>
<li>BoJ’s lower GDP growth forecasts add weight to the rate hike deferral; we focus on big-cap banks that have more in the tank than high gearing to rising benchmark rates</li>
<li>An increasingly important factor, in our view, is the share of strategic equity holdings relative to market capitalization; Kyoto is top on this metric, followed by Shizuoka, Resona and Mizuho</li>
<li>With the lack of the rate hike catalyst in the near term, we remove SMFG from the buy list and would look to lighten holdings selectively in other Japanese banks</li>
</ul>


BoJ’s lower GDP growth forecasts add weight to the rate hike deferral; we focus on big-cap banks that have more in the tank than high gearing to rising benchmark rates
An increasingly important factor, in our view, is the share of strategic equity holdings relative to market capitalization; Kyoto is top on this metric, followed by Shizuoka, Resona and Mizuho
With the lack of the rate hike catalyst in the near term, we remove SMFG from the buy list and would look to lighten holdings selectively in other Japanese banks


Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes

Japan

Shizuoka Financial Group, Inc. offers banking services. The Company provides deposits, loans, fund management, domestic settlement, and other services. Shizuoka Financial Group provides its services throughout Japan.

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Shizuoka Financial Group (5831 JP)

Japanese Big Cap Banks – Stick with Our Key Positive Picks

Despite the recent lack of BoJ rate hikes, JGB yield curve steepening benefits Japanese banks, focus remains on gearing to higher rates and equity...

Victor Galliano

Nikkei 225 Proposal for Dealing With Sony's (6758) Sony Finl Spinoff - A Non-Event but TOPIX Isn't

The Nikkei has amended the Indecx Guidebook for the Nikkei 225 Average after its consultation result regarding the Sony Financial spin-off. It is...

Travis Lundy

Japanese Big Cap Banks – Key Fundamental Tailwinds Drive Our Positive Picks

Japanese market interest rates continue to rise from low levels. Our scorecard justifies buy recommendations for Resona, Mizuho, and largely,...

Victor Galliano

[Japan Event] Seven Bank (8410) To Buy Back Up to 17.0% of Shares Out Tomorrow

Seven Bank will buy back shares this AM (Friday 20 June) in a ToSTNeT-3 transaction as York Holdings entities sell and 7-Eleven Japan goes below...

Travis Lundy

Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes

Focusing on big-cap banks that have more in the tank than high gearing to rising interest rates; Kyoto is top in terms of share of equity holdings...

Victor Galliano

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