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 positive focus remains on smaller cap Indian banks, with buys on value plays Bandhan, Baroda and UBI; we are negative on richly valued ICICI Bank and Kotak Mahindra</li>
<li>UBI shares have been poor performers, but its returns to 1QFYE25 have improved and it is a value stand-out; Baroda remains a favourite and Bandhan has delivered better profitability </li>
<li>Kotak Mahindra is the peer group’s highest return bank post credit costs, but returns are declining; ICICI also has attractive returns but we believe its credit costs are unsustainably low</li>
</ul>


Our positive focus remains on smaller cap Indian banks, with buys on value plays Bandhan, Baroda and UBI; we are negative on richly valued ICICI Bank and Kotak Mahindra
UBI shares have been poor performers, but its returns to 1QFYE25 have improved and it is a value stand-out; Baroda remains a favourite and Bandhan has delivered better profitability 
Kotak Mahindra is the peer group’s highest return bank post credit costs, but returns are declining; ICICI also has attractive returns but we believe its credit costs are unsustainably low


Indian Banks Screener 1QFYE25: Positive Focus on Value Based Smaller Caps

Derivatives and Quantitative Strategist

Gaudenz Schneider

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> and the <a href="https://www.smartkarma.com/entities/nse-nifty-bank-index" target="_blank" data-smartkarma-citation="entities:26811:1" rel="noopener">NSE Nifty Bank Index (NSEBANK INDEX EQUITY)</a> reached all-time highs on 26 September 2024 but have since declined.</li>
<li>Most stocks in the Bank Index have fallen below their 200 and 50 day moving average,. Volatilities have gone up, but trade cheap when compared to historical levels.</li>
<li>Opportunities present themselves either in stocks that stayed resilient during the downturn (<a href="https://www.smartkarma.com/entities/federal-bank-ltd" target="_blank" data-smartkarma-citation="entities:11784:1" rel="noopener">Federal Bank (FB IN)),</a>or fell and gained in implied volatility. A long-short strategy might also be considered.</li>
</ul>


The NIFTY Index (NIFTY INDEX) and the NSE Nifty Bank Index (NSEBANK INDEX EQUITY) reached all-time highs on 26 September 2024 but have since declined.
Most stocks in the Bank Index have fallen below their 200 and 50 day moving average,. Volatilities have gone up, but trade cheap when compared to historical levels.
Opportunities present themselves either in stocks that stayed resilient during the downturn (Federal Bank (FB IN)),or fell and gained in implied volatility. A long-short strategy might also be considered.


EQD | Nifty Banks – Single Stock Options and Relative Value Opportunities

<ul>
<li>We retain Bank of Baroda as the value Indian bank, despite its strong share performance, for its modest valuations, healthy ROE and further improvements in delinquency metrics</li>
<li>HDFC Bank remains out of favour with the market but we retain it as a buy, with its potential for medium term gains post-merger and its strong balance sheet</li>
<li>Axis bank remains on our watchlist; we remain negative on State Bank of India for its delinquency risks, low core capital ratio and limited progress on returns</li>
</ul>


We retain Bank of Baroda as the value Indian bank, despite its strong share performance, for its modest valuations, healthy ROE and further improvements in delinquency metrics
HDFC Bank remains out of favour with the market but we retain it as a buy, with its potential for medium term gains post-merger and its strong balance sheet
Axis bank remains on our watchlist; we remain negative on State Bank of India for its delinquency risks, low core capital ratio and limited progress on returns


Indian Banks Screener: Bank of Baroda Remains the Value Pick, HDFC Bank Is the Quality Name

Equity Research Analyst - Long-Short

Raj S, CA, CFA

Artoval Advisors

Art’o’val stands for Art of Valuation. Artoval Advisors LLP is a professionally run advisory firm catering to various financial advisory services including Valuation, Investment Research, Training, Accounting, CFO Services and other ancillary services.

We are passionate about what we do and strongly believe in working with our clients as their extended teams. With Artoval Advisors as their trusted partner, our clients find it easy to achieve efficiency in service delivery without compromising on quality.

True Art of Valuation

<ul>
<li>
Bank Of Baroda (BOB IN)  has become the second-best PSU bank in India after SBIN, in terms of improvement in asset quality and profitability.</li>
<li>
Medium-Term ROE Forecast 16% to 18%; ROA &gt;1% consistently; Asset Quality problems receding; Strategy is to diversify loan book towards retail further and focus on improving efficiencies</li>
<li>
Despite the recent rally, P/BV is cheap at 0.9x FY25e for high teen ROE business. BOB can easily re-rate to P/BV of 1.3x FY25e in the near term</li>
</ul>



Bank Of Baroda (BOB IN)  has become the second-best PSU bank in India after SBIN, in terms of improvement in asset quality and profitability.

Medium-Term ROE Forecast 16% to 18%; ROA &gt;1% consistently; Asset Quality problems receding; Strategy is to diversify loan book towards retail further and focus on improving efficiencies

Despite the recent rally, P/BV is cheap at 0.9x FY25e for high teen ROE business. BOB can easily re-rate to P/BV of 1.3x FY25e in the near term


Bank Of Baroda (BOB IN): Initiating Coverage – Best Value Bet Among Indian Banks

<ul>
<li>
<a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank Of India (SBIN IN)</a> is the best-performing PSU bank in India and shows clear convergence with private peers across fundamental metrics beyond what its valuations might suggest</li>
<li>Medium-Term ROE Forecast of 16% to 18% and loan growth forecast of 14% to 16%; ROA ~1.2% consistently; Strong fee income; successful cross-selling through subsidiaries; Strong asset quality.
</li>
<li>
 P/BV is cheap at 1.3x FY25e, compared private peers’ valuations of 2.5x to 3.0x. SBIN can potentially re-rate to P/BV of ~1.6x FY25e in the near term (~35% upside).</li>
</ul>



State Bank Of India (SBIN IN) is the best-performing PSU bank in India and shows clear convergence with private peers across fundamental metrics beyond what its valuations might suggest
Medium-Term ROE Forecast of 16% to 18% and loan growth forecast of 14% to 16%; ROA ~1.2% consistently; Strong fee income; successful cross-selling through subsidiaries; Strong asset quality.


 P/BV is cheap at 1.3x FY25e, compared private peers’ valuations of 2.5x to 3.0x. SBIN can potentially re-rate to P/BV of ~1.6x FY25e in the near term (~35% upside).


State Bank Of India (SBIN IN): Initiation -  Convergence with Private Peers, Poised for Re-Rating

India

Bank of Baroda owns and operates commercial banks in India.  The Group's banks provide the traditional forms of banking services, including CD's, Credit Card services and a variety of car loans, in addition to gold banking and a range of insurance services.  The Group also owns IBU International Finance Limited, an international banking company in Hong Kong.

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Bank Of Baroda (BOB IN)

Indian Banks Screener 1QFYE25: Positive Focus on Value Based Smaller Caps

Positive focus on smaller cap, value based Indian banks Bandhan, Baroda, and UBI; negative on richly valued ICICI Bank and Kotak Mahindra due to...

Victor Galliano

EQD | Nifty Banks – Single Stock Options and Relative Value Opportunities

The NSE Nifty Bank Index hit a record high in September 2024 but has since dropped. Option opportunities are found in resilient or volatile bank...

Gaudenz Schneider

Indian Banks Screener: Bank of Baroda Remains the Value Pick, HDFC Bank Is the Quality Name

Bank of Baroda is our top pick with modest valuations, healthy ROE, improving returns; HDFC Bank is a buy too having potential for medium term...

Victor Galliano