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>We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate</li>
<li>We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations</li>
<li>Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations</li>
</ul>


We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate
We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations
Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations


EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

<ul>
<li>Varo bank published 4Q22 results that revealed lower quarterly cash burn through cost control, but revenue per client declined and the very high customer acquisition cost</li>
<li>SoFi’s cost reduction success in 4Q22 seems, in contrast to Varo, to have limited revenue loss, thereby bringing SoFi closer to breakeven; it trades at a premium to peers</li>
<li>These early 4Q22 results signals may provide some read across which we believe could be negative for Dave in particular, as well being a reality check for Inter’s US ambitions</li>
</ul>


Varo bank published 4Q22 results that revealed lower quarterly cash burn through cost control, but revenue per client declined and the very high customer acquisition cost
SoFi’s cost reduction success in 4Q22 seems, in contrast to Varo, to have limited revenue loss, thereby bringing SoFi closer to breakeven; it trades at a premium to peers
These early 4Q22 results signals may provide some read across which we believe could be negative for Dave in particular, as well being a reality check for Inter’s US ambitions


US Neobanks; Warning Signals from SoFi and Varo 4Q Results

<ul>
<li>We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy</li>
<li>Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations</li>
<li>Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch</li>
</ul>


We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy
Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations
Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch


EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

<ul><li>We remain positive on Rakuten Bank, with its group ecosphere as a source of customer growth, its low cost base, and extremely low NPL ratio</li><li>Rakuten Bank trades on the lowest PE multiple of the neobank peer group , with the low ROE to PBV ratio close to the best of its neobank peers</li><li>Nubank shares have done well since we upgraded to a buy in January; we recommend investors to take profits given Nubank’s  limited potential for positive surprises and its stretched valuations</li></ul>

We remain positive on Rakuten Bank, with its group ecosphere as a source of customer growth, its low cost base, and extremely low NPL ratioRakuten Bank trades on the lowest PE multiple of the neobank peer group , with the low ROE to PBV ratio close to the best of its neobank peersNubank shares have done well since we upgraded to a buy in January; we recommend investors to take profits given Nubank’s  limited potential for positive surprises and its stretched valuations

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

<ul>
<li>4Q22 results confirm that Nubank is the benchmark among EM neobanks in terms of activity rates, as well as trends in revenues and costs per client and digital efficiencies</li>
<li>We see further potential for broadening and deepening the product offer to customers, at little incremental cost especially in Brazil, to drive cost effective revenue growth</li>
<li>Our proprietary Nubank model forecasts are broadly in sync with positive consensus estimates; we forecast group ROE of close to 30% in FY 2025, despite high cost of credit assumptions</li>
</ul>


4Q22 results confirm that Nubank is the benchmark among EM neobanks in terms of activity rates, as well as trends in revenues and costs per client and digital efficiencies
We see further potential for broadening and deepening the product offer to customers, at little incremental cost especially in Brazil, to drive cost effective revenue growth
Our proprietary Nubank model forecasts are broadly in sync with positive consensus estimates; we forecast group ROE of close to 30% in FY 2025, despite high cost of credit assumptions


Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Brazil

Inter & Co, Inc. operates as an investment holding company. The Company, through its subsidiaries, serves customers in Brazil.

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Inter & Co (INTR US)

EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

KakaoBank raised to buy for its firm business niche, its positive banking and capital ratios; Inter is also a buy for its undemanding valuations...

Victor Galliano

US Neobanks; Warning Signals from SoFi and Varo 4Q Results

Varo bank's 4Q results revealed lower quarterly cash burn through cost control, but revenue per client declined; SoFi seemed to have done a bit...

Victor Galliano

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...

Victor Galliano

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

In listed neobanks, we stay positive on Rakuten bank for its growth potential and attractive valuation, but it is time to take profits on Nubank.

Victor Galliano

Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Nubank presented solid 4Q22 results, with high activity rates, growing revenue per customer, controlled costs per customer whilst keeping a sound...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

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EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

KakaoBank raised to buy for its firm business niche, its positive banking and capital ratios; Inter is also a buy for its undemanding valuations...

Victor Galliano

US Neobanks; Warning Signals from SoFi and Varo 4Q Results

Varo bank's 4Q results revealed lower quarterly cash burn through cost control, but revenue per client declined; SoFi seemed to have done a bit...

Victor Galliano

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

​Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...

Victor Galliano

EM & Japan Neobanks – Stick with Rakuten Bank (5838 JP), but Time to Take Profits on Nubank (NU US)

In listed neobanks, we stay positive on Rakuten bank for its growth potential and attractive valuation, but it is time to take profits on Nubank.

Victor Galliano

Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond

Nubank presented solid 4Q22 results, with high activity rates, growing revenue per customer, controlled costs per customer whilst keeping a sound...

Victor Galliano

Positive on Banco PAN for healthy metrics, attractive valuations and capital adequacy. Cautious on Nubank due to capital erosion and lofty...