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>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?

Equity Bottom-Up

<ul>
<li>In September, we highlight that data on credit in arrears (15-90 days overdue) showed MoM improvements in all our measures; this implies a positive leading indicator for NPLs</li>
<li>System loan growth was +16.8% for the twelve months to September, a slight acceleration from the August YoY rate (+16.7%), due largely to faster corporate loan growth</li>
<li>New credit spreads appear to have peaked, even if spreads on average loans are set to remain elevated; we favour Banco do Brasil, for good credit quality and attractive valuations</li>
</ul>


In September, we highlight that data on credit in arrears (15-90 days overdue) showed MoM improvements in all our measures; this implies a positive leading indicator for NPLs
System loan growth was +16.8% for the twelve months to September, a slight acceleration from the August YoY rate (+16.7%), due largely to faster corporate loan growth
New credit spreads appear to have peaked, even if spreads on average loans are set to remain elevated; we favour Banco do Brasil, for good credit quality and attractive valuations


September Brazil Bank Data Charts – Arrears Imply Better NPLs Trends to Come; Have Spreads Peaked?

<ul>
<li>Brazil’s consumer credit quality trends to August deteriorated across most consumer categories, and especially in the case of the credit cards</li>
<li>System loan growth was +16.8% for the twelve months to August, a slight slowdown from the July YoY rate (+16.9%), due largely to slower consumer loan growth</li>
<li>The BCB’s latest Focus report indicates that the 13.75% benchmark rate should remain in double digits into 2023; we favour Banco do Brasil, for good credit quality and attractive valuations</li>
</ul>


Brazil’s consumer credit quality trends to August deteriorated across most consumer categories, and especially in the case of the credit cards
System loan growth was +16.8% for the twelve months to August, a slight slowdown from the July YoY rate (+16.9%), due largely to slower consumer loan growth
The BCB’s latest Focus report indicates that the 13.75% benchmark rate should remain in double digits into 2023; we favour Banco do Brasil, for good credit quality and attractive valuations


August Brazil Bank Data in Charts – Credit Spreads Keep Rising, but Consumer NPL Trends Worsened

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>We are starting to see early signs of a potential bottom on MSCI EM (EEM-US).</li>
<li>Specifically, the EEM-US has reversed topside its 6-month downtrend. If MSCI EM has indeed bottomed, we want to be buying the leaders; that is where this report comes in.</li>
<li>Specific themes include attractive opportunities in India and Thailand, and also many in Taiwan and South Korea. Attractive Sectors include Energy, Financials, Materials, and Industrials.</li>
</ul>


We are starting to see early signs of a potential bottom on MSCI EM (EEM-US).
Specifically, the EEM-US has reversed topside its 6-month downtrend. If MSCI EM has indeed bottomed, we want to be buying the leaders; that is where this report comes in.
Specific themes include attractive opportunities in India and Thailand, and also many in Taiwan and South Korea. Attractive Sectors include Energy, Financials, Materials, and Industrials.


Finding Leadership Within Emerging Markets

<ul>
<li>Brazil’s consumer credit quality trends to June showed an improvement across most series, with the exception of the credit cards category</li>
<li>System loan growth was +17.8% for the twelve months to June, an acceleration from the YoY rate for May (+16.9%), due largely to the pick-up in corporate loan growth</li>
<li>The BCB’s latest consensus estimates suggest that benchmark rate have now peaked at 13.75%; our preferred Brazilian bank remains Banco do Brasil, for good credit quality and attractive valuations</li>
</ul>


Brazil’s consumer credit quality trends to June showed an improvement across most series, with the exception of the credit cards category
System loan growth was +17.8% for the twelve months to June, an acceleration from the YoY rate for May (+16.9%), due largely to the pick-up in corporate loan growth
The BCB’s latest consensus estimates suggest that benchmark rate have now peaked at 13.75%; our preferred Brazilian bank remains Banco do Brasil, for good credit quality and attractive valuations


June Brazil Bank Data in Twelve Charts – Credit Spreads Keep Rising, NPLs More Benign

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)

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

September Brazil Bank Data Charts – Arrears Imply Better NPLs Trends to Come; Have Spreads Peaked?

Credit in arrears (15-90 days overdue) showed MoM improvements in all our metrics, implying a positive leading indicator for NPLs; new credit...

Victor Galliano

August Brazil Bank Data in Charts – Credit Spreads Keep Rising, but Consumer NPL Trends Worsened

Credit spreads continue to rise - even after benchmark rates have peaked - but the August data shows rising NPL trends in credit cards, auto...

Victor Galliano

Finding Leadership Within Emerging Markets

We are starting to see early signs of a potential bottom on $EEM. Specifically, the EEM has reversed topside its 6-month downtrend. If EEM has...

Vermilion Research

June Brazil Bank Data in Twelve Charts – Credit Spreads Keep Rising, NPLs More Benign

In June, the Brazil bank sector experienced accelerating credit growth, rising loan rates and spreads as well as improving near term NPL trends,...

Victor Galliano

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Market Cap (USDm)

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