Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering the Italian banks. He has worked in sell side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings and NatWest.
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.

Financials & FinTech research

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Banorte: Turning Bullish, as It Bites the Provisions Bullet and Non-Bank Entities Support Group ROE

Mexican Banks ROE Recovery Continues into June

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Bifurcated Chinese Express Market Developing

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

Grupo Financiero Banorte SAB d / Equity Bottom-Up

Grupo Financiero Banorte SAB d (GFNORTEO MF)

<ul>
<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>’s 3Q21 results reflect the strength of the banking operation, balance sheet and its superior credit quality</li>
<li>The disappointments come in the non-bank operations, specifically the weakness in insurance</li>
<li>Yet the banking operations still fall short of pre-pandemic ROE levels, despite the very low cost of risk charge</li>
<li>On valuation, Banorte now trades close to its high in terms of pre-pandemic PBV ratio and its PBV is higher than Brazilian banking bell-weather Itaú Unibanco for the first time in three years</li>
<li>Even though the positive investor momentum is likely to be with Mexican equities in the short term, we believe that Banorte may be challenged to further enhance bank returns, due to intensifying competition from fintechs in Mexico</li>
<li>Banorte’s dividend yield forecasts are amongst the best in the sector, which is a share price support; yet the prospective dividend pay-out ratio is high, and so limits the potential for further dividend growth, in our view</li>
<li>Banorte has been one of our core bull calls in LatAm financials, but we now take a contrarian bearish view on Banorte, as we believe that much of the good news is discounted by the share price and we expect banking returns to be impacted by growing competition from fintechs</li>
<li>Risks to our negative view on Banorte include a lower cost of funding, better than expected fee growth as well as a falling cost of risk going forward and a limited adverse impact from fintech challengers</li>
</ul>



Grupo Financiero Banorte (GFNORTEO MF)’s 3Q21 results reflect the strength of the banking operation, balance sheet and its superior credit quality
The disappointments come in the non-bank operations, specifically the weakness in insurance
Yet the banking operations still fall short of pre-pandemic ROE levels, despite the very low cost of risk charge
On valuation, Banorte now trades close to its high in terms of pre-pandemic PBV ratio and its PBV is higher than Brazilian banking bell-weather Itaú Unibanco for the first time in three years
Even though the positive investor momentum is likely to be with Mexican equities in the short term, we believe that Banorte may be challenged to further enhance bank returns, due to intensifying competition from fintechs in Mexico
Banorte’s dividend yield forecasts are amongst the best in the sector, which is a share price support; yet the prospective dividend pay-out ratio is high, and so limits the potential for further dividend growth, in our view
Banorte has been one of our core bull calls in LatAm financials, but we now take a contrarian bearish view on Banorte, as we believe that much of the good news is discounted by the share price and we expect banking returns to be impacted by growing competition from fintechs
Risks to our negative view on Banorte include a lower cost of funding, better than expected fee growth as well as a falling cost of risk going forward and a limited adverse impact from fintech challengers


Banorte (GFNORTEO MM): Contrarian Move to Underweight - Sound 3Q21 but Much Is Discounted