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>Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023</li>
<li>Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank</li>
<li>Our key sells are ICICI Bank from India and digital bank Jago from Indonesia</li>
</ul>


Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023
Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank
Our key sells are ICICI Bank from India and digital bank Jago from Indonesia


Equity Bottom-Up

<ul>
<li>We stay negative on Nubank, even after the recent share correction; our rationale is tough competition, especially in Mexico, and worsening credit quality to remain a key risk in Brazil</li>
<li>We believe that the fundamental outlook for Bradesco should improve further, supported by its strong insurance operations; conservatively, we estimate insurance could account for two thirds of group value</li>
<li>Our neutral on Banco do Brasil is due largely to heightened political risk; holding company Itausa is the best indirect vehicle through which to gain equity exposure in Banco Itaú</li>
</ul>


We stay negative on Nubank, even after the recent share correction; our rationale is tough competition, especially in Mexico, and worsening credit quality to remain a key risk in Brazil
We believe that the fundamental outlook for Bradesco should improve further, supported by its strong insurance operations; conservatively, we estimate insurance could account for two thirds of group value
Our neutral on Banco do Brasil is due largely to heightened political risk; holding company Itausa is the best indirect vehicle through which to gain equity exposure in Banco Itaú


Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

<ul>
<li>We take a more nuanced view on Nubank; the stock has corrected 16%+ from its high and, despite 28% YoY loan book growth, it has organically generated capital in 3Q24</li>
<li>Although Nubank is a digital bank success story, increased competition, especially from other fintechs, and a further deterioration in credit quality remain key business challenges going forward</li>
<li>Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain sellers of Nubank; we stay positive on Bradesco</li>
</ul>


We take a more nuanced view on Nubank; the stock has corrected 16%+ from its high and, despite 28% YoY loan book growth, it has organically generated capital in 3Q24
Although Nubank is a digital bank success story, increased competition, especially from other fintechs, and a further deterioration in credit quality remain key business challenges going forward
Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain sellers of Nubank; we stay positive on Bradesco


Nubank (NU US) – Gravity’s Pull and Key Business Factors

<ul>
<li>Bradesco’s quarterly results disappointed the market due to soft interest margins, despite the clear indications of Bradesco’s improving returns and better credit quality metrics</li>
<li>NuBank is a digital bank success story, but it has credit quality challenges and also potential capital constraints, due to its fast loan growth</li>
<li>We remain neutral on Itaú and Banco do Brasil; Banco do Brasil seems attractive on valuations, but it is more exposed to political risk; buy Bradesco, sell Nubank</li>
</ul>


Bradesco’s quarterly results disappointed the market due to soft interest margins, despite the clear indications of Bradesco’s improving returns and better credit quality metrics
NuBank is a digital bank success story, but it has credit quality challenges and also potential capital constraints, due to its fast loan growth
We remain neutral on Itaú and Banco do Brasil; Banco do Brasil seems attractive on valuations, but it is more exposed to political risk; buy Bradesco, sell Nubank


Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

<ul>
<li>We stick with Bradesco as the key pick in big-cap Brazilian and LatAm banks, for its earnings recovery prospects; the very low PEG and PBV ratio reflect its re-rating potential</li>
<li>NuBank is a digital bank success story, but one that we see has challenges in terms of credit quality and it has potential capital constraints given its fast loan growth</li>
<li>We are neutral on Itaú and Banco do Brasil; Itaú seems to be fairly valued whilst Banco do Brasil is optically attractive, but it is more exposed to political risk</li>
</ul>


We stick with Bradesco as the key pick in big-cap Brazilian and LatAm banks, for its earnings recovery prospects; the very low PEG and PBV ratio reflect its re-rating potential
NuBank is a digital bank success story, but one that we see has challenges in terms of credit quality and it has potential capital constraints given its fast loan growth
We are neutral on Itaú and Banco do Brasil; Itaú seems to be fairly valued whilst Banco do Brasil is optically attractive, but it is more exposed to political risk


Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

Brazil

Banco do Brasil S.A. attracts deposits and offers retail and commercial banking services.  The Bank offers consumer, commercial, and agribusiness loans, asset management, foreign exchange, private pension, insurance, lease financing, credit cards, and Internet banking services.

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Banco do Brasil (BBAS3 BZ)

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Victor Galliano

Nubank (NU US) – Gravity’s Pull and Key Business Factors

Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Brazil Banks – Buy Bradesco for Value and Improving Returns, Nubank Is Stretched on Valuations

​Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Victor Galliano

Nubank (NU US) – Gravity’s Pull and Key Business Factors

​Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

​The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

​With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...

Victor Galliano

Negative on Nubank due to tough competition and credit risks, bullish on Bradesco with its strong insurance arm, neutral on Banco do Brasil due to...

Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...