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

Brazil Bank Sector Trends to March in Ten Charts

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Brazil Banks YE2020 Snapshot II: Banco Do Brasil (BBAS3 BZ) Fair Credit Quality, Positive on Capital

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Banco Do Brasil (BBAS3 BZ): CEO Resignation, near Term Downside, but How Much Is Already Discounted?

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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>The double digit system YoY loan growth to February is deceptive, and largely a product of government sponsored relief lending especially ex-corporate</li>
<li>Headline credit quality continues to deteriorate, with the mortgage NPL ratio accelerating in February albeit from a low base</li>
<li>Arrears (15-90 days overdue loans) also showed a deterioration in February, with loans to individuals leading the way</li>
<li>The debt burden of households (latest available data to December) also showed domestic finances under further strain</li>
<li>Despite the sharp increase in benchmark SELIC rate to 2.75% from 2% earlier in March, credit spreads only edged higher in new credit to individuals in February</li>
<li>We expect the picture to become increasingly challenging for Brazilian banks on credit quality in particular going forward; we maintain our positive view on <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a>, but would be cautious on the other big-cap bank names in Brazil</li>
<li>Risks to our positive view on Banco do Brasil includes much worse than expected NPLs, higher than expected spread pressure and poor opex control</li>
</ul>


The double digit system YoY loan growth to February is deceptive, and largely a product of government sponsored relief lending especially ex-corporate
Headline credit quality continues to deteriorate, with the mortgage NPL ratio accelerating in February albeit from a low base
Arrears (15-90 days overdue loans) also showed a deterioration in February, with loans to individuals leading the way
The debt burden of households (latest available data to December) also showed domestic finances under further strain
Despite the sharp increase in benchmark SELIC rate to 2.75% from 2% earlier in March, credit spreads only edged higher in new credit to individuals in February
We expect the picture to become increasingly challenging for Brazilian banks on credit quality in particular going forward; we maintain our positive view on Banco Do Brasil Sa (BBAS3 BZ), but would be cautious on the other big-cap bank names in Brazil
Risks to our positive view on Banco do Brasil includes much worse than expected NPLs, higher than expected spread pressure and poor opex control


Banco do Brasil

Brazil Bank Sector Trends in Nine Charts