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>Our focus charts this month are on Brazil banks’ liquidity and capital adequacy trends, which seem reassuring to us, as these are currently topical bank ratios in investors’ minds</li>
<li>The February NPL trends due to seasonal factors, we are concerned at the pace of NPL ratio worsening and arrears, especially in household credit</li>
<li>YoY system loan growth to February decelerated further to +12.6%, largely due to slower corporate loan growth; credit spread trends were mixed with individual spreads widening, and corporate spreads eroding</li>
</ul>


Our focus charts this month are on Brazil banks’ liquidity and capital adequacy trends, which seem reassuring to us, as these are currently topical bank ratios in investors’ minds
The February NPL trends due to seasonal factors, we are concerned at the pace of NPL ratio worsening and arrears, especially in household credit
YoY system loan growth to February decelerated further to +12.6%, largely due to slower corporate loan growth; credit spread trends were mixed with individual spreads widening, and corporate spreads eroding


February Brazil Bank Data in Charts – NPL Trends a Concern, yet Liquidity and Solvency Seem Sound

Thematic (Sector/Industry)

<ul>
<li>We examine key balance sheet ratios of the Latam banks looking into liquidity, credit quality and capital adequacy, at a time of investor nervousness and concern</li>
<li>Based on our screening, our positive value picks are Bradesco and BanColombia, with Banco de Chile, BanBajio and BanRegio composing our positive high quality picks</li>
<li>Our bearish picks are Banorte and BCI; Banorte is strong in terms of capital adequacy and credit quality, but is exposed in terms of its big securities portfolio</li>
</ul>


We examine key balance sheet ratios of the Latam banks looking into liquidity, credit quality and capital adequacy, at a time of investor nervousness and concern
Based on our screening, our positive value picks are Bradesco and BanColombia, with Banco de Chile, BanBajio and BanRegio composing our positive high quality picks
Our bearish picks are Banorte and BCI; Banorte is strong in terms of capital adequacy and credit quality, but is exposed in terms of its big securities portfolio


LatAm Banks – Liquidity, Solvency and Credit Quality in Focus in a Crisis

<ul>
<li>Even though January usually shows poor NPL trends due to seasonal factors, we are concerned at the pace of NPL ratio worsening and arrears, especially in household credit</li>
<li>System loan growth over the last twelve months to January decelerated further (from +14% to December) but still grew by +13.6%, helped by a slight pick-up in consumer loan growth</li>
<li>New credit spreads rebounded MoM, along with lending rates; rising political risk is a concern so we turned cautious on Banco do Brasil, and we remain cautious on Santander Brasil</li>
</ul>


Even though January usually shows poor NPL trends due to seasonal factors, we are concerned at the pace of NPL ratio worsening and arrears, especially in household credit
System loan growth over the last twelve months to January decelerated further (from +14% to December) but still grew by +13.6%, helped by a slight pick-up in consumer loan growth
New credit spreads rebounded MoM, along with lending rates; rising political risk is a concern so we turned cautious on Banco do Brasil, and we remain cautious on Santander Brasil


January Brazil Bank Data in Charts –NPL Trends Are the Main Concern

<ul>
<li>Lula increased his verbal offensive against the Central Bank’s independence and its monetary policy; is this a storm in a teacup or a threat to the Central Bank’s status quo?</li>
<li>With the appointment of Fernando Haddad as left-leaning finance minister, there is genuine concern regarding the scope for potential interference by the Lula administration in forthcoming monetary policy</li>
<li>Government interference could lead to public sector banks offering more subsidized credit to lower income groups; although this is Caixa Economica Federal’s domain, this could increasingly include Banco do Brasil</li>
</ul>


Lula increased his verbal offensive against the Central Bank’s independence and its monetary policy; is this a storm in a teacup or a threat to the Central Bank’s status quo?
With the appointment of Fernando Haddad as left-leaning finance minister, there is genuine concern regarding the scope for potential interference by the Lula administration in forthcoming monetary policy
Government interference could lead to public sector banks offering more subsidized credit to lower income groups; although this is Caixa Economica Federal’s domain, this could increasingly include Banco do Brasil


Lula Hits Out at Central Bank Independence; Time to Take Profits on Banco Do Brasil

<ul>
<li>Lula’s narrow win in the second round of the Brazilian Presential election has so far passed in relative calm, although sitting President Jair Bolsonaro has yet to concede defeat</li>
<li>Markets will be hoping for a peaceful transition, and influential Bolsonaro allies have asked Brazilians to respect the result, to avoid social unrest and any potential intervention by the military</li>
<li>It is unclear how anti-market Lula’s policies will be but we expect downside risk for Brazilian financials and fintechs; Banco do Brasil is in for volatility, Itausa may be defensive</li>
</ul>


Lula’s narrow win in the second round of the Brazilian Presential election has so far passed in relative calm, although sitting President Jair Bolsonaro has yet to concede defeat
Markets will be hoping for a peaceful transition, and influential Bolsonaro allies have asked Brazilians to respect the result, to avoid social unrest and any potential intervention by the military
It is unclear how anti-market Lula’s policies will be but we expect downside risk for Brazilian financials and fintechs; Banco do Brasil is in for volatility, Itausa may be defensive


Brazilian Presidential Election; What Could a Lula Victory Mean for Financials and Fintech?

Brazil

Banco Bradesco S.A. attracts deposits and offers commercial banking services. The Bank offers business loans, personal credit, mortgages, lease financing, mutual funds, securities brokerage, and Internet banking services.  Bradesco operates in Brazil and Argentina, the United States, the Cayman Islands, and the United Kingdom.  Bradesco offers credit cards, insurance, and pension funds.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Banco Bradesco (BBDC4 BZ)

February Brazil Bank Data in Charts – NPL Trends a Concern, yet Liquidity and Solvency Seem Sound

We add Brazil banks’ liquidity & capital adequacy ratios, which seem reassuring, whilst the credit quality metrics are mixed with SME NPLs rising;...

Victor Galliano

LatAm Banks – Liquidity, Solvency and Credit Quality in Focus in a Crisis

Focus on LatAm banks liquidity, solvency and credit quality; we like Bradesco and BanColombia as value plays with Banco de Chile, BanBajio &...

Victor Galliano

January Brazil Bank Data in Charts –NPL Trends Are the Main Concern

Seasonally, January data tends to show poor NPL trends but the pace of NPL ratio worsening are a concern; we became cautious on Banco do Brasil due...

Victor Galliano

Lula Hits Out at Central Bank Independence; Time to Take Profits on Banco Do Brasil

Lula hitting out at the Central Bank means growing political risk for Banco do Brasil; we downgrade it to neutral on spread erosion risk from...

Victor Galliano

Brazilian Presidential Election; What Could a Lula Victory Mean for Financials and Fintech?

Lula's victory is near term negative for Brazil risk assets; in fintech & financials, we see volatility risk for Banco do Brasil, we are negative...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)