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 update our views on ten Japanese midcap banks targeting attractively valued beneficiaries of the realization of big strategic shareholdings, as well as beneficiaries of the improving interest rate outlook</li>
<li>We re-iterate our buys on Hachijuni Bank and Hokuhoku Financial; there is potential to realize their large strategic holdings relative to their market capitalizations combined with their attractive PTBV ratios</li>
<li>We take Gunma Bank off the buy list, replacing it with Iyogin; Iyogin has a constructive mix of large strategic holdings, attractive valuations and healthy gearing to higher interest rates</li>
</ul>


We update our views on ten Japanese midcap banks targeting attractively valued beneficiaries of the realization of big strategic shareholdings, as well as beneficiaries of the improving interest rate outlook
We re-iterate our buys on Hachijuni Bank and Hokuhoku Financial; there is potential to realize their large strategic holdings relative to their market capitalizations combined with their attractive PTBV ratios
We take Gunma Bank off the buy list, replacing it with Iyogin; Iyogin has a constructive mix of large strategic holdings, attractive valuations and healthy gearing to higher interest rates


Japanese Midcap Banks – Hachijuni (8359 JP) Is Our Top Pick

Hokuhoku Financial Group / Equity Bottom-Up

<ul>
<li>We analyse ten Japanese midcap banks to target beneficiaries of the realization of strategic shareholdings, as well as beneficiaries of the improving interest rate outlook</li>
<li>We add Hachijuni Bank and Hokuhoku Financial to the buy list, based on the potential for realization of strategic holdings; these share-holdings are large relative to their respective market capitalizations</li>
<li>We maintain Gunma Bank on the buy list, primarily for its very strong gearing into the rising interest cycle and its attractive PE multiples</li>
</ul>


We analyse ten Japanese midcap banks to target beneficiaries of the realization of strategic shareholdings, as well as beneficiaries of the improving interest rate outlook
We add Hachijuni Bank and Hokuhoku Financial to the buy list, based on the potential for realization of strategic holdings; these share-holdings are large relative to their respective market capitalizations
We maintain Gunma Bank on the buy list, primarily for its very strong gearing into the rising interest cycle and its attractive PE multiples


Japanese Midcap Banks – Three Key Picks

Mizuho Financial Group / Equity Bottom-Up

<ul>
<li>We focus on five key factors, namely capital adequacy, credit quality, exposure to government securities, interest rate gearing and valuation with growth metrics for our Japanese banks universe</li>
<li>It is important to note that the relaxation of yield curve control is translating into rising loan yields generally in the BoJ data to September-end 2023</li>
<li>We stick with our positive views on Resona, Mizuho and Concordia; we remove Hachijuni from the buy list and SMFG, replacing the latter with MUFG in the large cap banks</li>
</ul>


We focus on five key factors, namely capital adequacy, credit quality, exposure to government securities, interest rate gearing and valuation with growth metrics for our Japanese banks universe
It is important to note that the relaxation of yield curve control is translating into rising loan yields generally in the BoJ data to September-end 2023
We stick with our positive views on Resona, Mizuho and Concordia; we remove Hachijuni from the buy list and SMFG, replacing the latter with MUFG in the large cap banks


Japanese Banks – Our Main Thoughts Post 2Q23 Results

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.</li>
<li>92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.</li>
<li>Big tables with data, reasons for guidance changes, and buyback history of each presented below.</li>
</ul>


40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.


Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

<ul>
<li>The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it</li>
<li>10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures</li>
<li>We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure</li>
</ul>


The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it
10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures
We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure


Japanese Banks – Nearing the Yield Curve Control End-Game

Japan

The Hachijuni Bank, Ltd. is a regional bank based in Nagano Prefecture. The Bank provides banking services such as deposits, loans, foreign exchange transactions, and trust accounts. The Bank also provides financial services such as leasing, credit cards, credit guarantee, debt recovery, trading, and venture capital and operates branches overseas.

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Hachijuni Bank (8359 JP)

Japanese Midcap Banks – Hachijuni (8359 JP) Is Our Top Pick

Japanese midcap banks: stick with buys on Hachijuni Bank and Hokuhoku Financial, replacing Gunma Bank with Iyogin for potential gains from equity...

Victor Galliano

Japanese Midcap Banks – Three Key Picks

We focus on Japanese midcap banks' key shareholder attributes; Hachijuni and Hokuhoku added to buys for their large strategic holdings, while Gunma...

Victor Galliano

Japanese Banks – Our Main Thoughts Post 2Q23 Results

We look to capital ratios, delinquency, exposure to sovereign bonds, interest rate gearing and valuation; buy Resona, Mizuho and Concordia, adding...

Victor Galliano

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

The macro backdrop for Japanese banks is pretty good. Business restructuring efforts are bearing fruit. Global macro is adding fees. Stocks are up,...

Travis Lundy

Japanese Banks – Nearing the Yield Curve Control End-Game

The BoJ's relaxation of yield curve control allows JGB yields to rise, positive for Japanese banks with big shares of floating-rate loans; we add...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Midcap Banks – Hachijuni (8359 JP) Is Our Top Pick

​Japanese midcap banks: stick with buys on Hachijuni Bank and Hokuhoku Financial, replacing Gunma Bank with Iyogin for potential gains from equity...

Victor Galliano

Japanese Midcap Banks – Three Key Picks

We focus on Japanese midcap banks' key shareholder attributes; Hachijuni and Hokuhoku added to buys for their large strategic holdings, while Gunma...

Victor Galliano

Japanese Banks – Our Main Thoughts Post 2Q23 Results

We look to capital ratios, delinquency, exposure to sovereign bonds, interest rate gearing and valuation; buy Resona, Mizuho and Concordia, adding...

Victor Galliano

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

The macro backdrop for Japanese banks is pretty good. Business restructuring efforts are bearing fruit. Global macro is adding fees. Stocks are up,...

Travis Lundy

Japanese Banks – Nearing the Yield Curve Control End-Game

​The BoJ's relaxation of yield curve control allows JGB yields to rise, positive for Japanese banks with big shares of floating-rate loans; we add...

Victor Galliano

Japanese midcap banks: stick with buys on Hachijuni Bank and Hokuhoku Financial, replacing Gunma Bank with Iyogin for potential gains from equity...

The BoJ's relaxation of yield curve control allows JGB yields to rise, positive for Japanese banks with big shares of floating-rate loans; we add...