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 take a more nuanced view on Nubank; the stock has corrected 16%+ from its high and, despite 28% YoY loan book growth, it has organically generated capital in 3Q24</li>
<li>Although Nubank is a digital bank success story, increased competition, especially from other fintechs, and a further deterioration in credit quality remain key business challenges going forward</li>
<li>Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain sellers of Nubank; we stay positive on Bradesco</li>
</ul>


We take a more nuanced view on Nubank; the stock has corrected 16%+ from its high and, despite 28% YoY loan book growth, it has organically generated capital in 3Q24
Although Nubank is a digital bank success story, increased competition, especially from other fintechs, and a further deterioration in credit quality remain key business challenges going forward
Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain sellers of Nubank; we stay positive on Bradesco


Nubank (NU US) – Gravity’s Pull and Key Business Factors

Thematic (Sector/Industry)

<ul>
<li>Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023</li>
<li>Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank</li>
<li>Our key sells are ICICI Bank from India and digital bank Jago from Indonesia</li>
</ul>


Among bigger cap GEM banks, we pick four longs and two shorts as our conviction calls for 2023
Our core buys are Bank Mandiri from Indonesia, Hana Financial from South Korea, China Construction Bank and BanColombia; we also have a special mentions category for Banco Itau and Nubank
Our key sells are ICICI Bank from India and digital bank Jago from Indonesia


Equity Capital Markets

<ul>
<li>Nubank, the leading digital native bank in Brazil and Latin America, by number of customers, has filed for an IPO with an indication valuation in excess of USD50bn </li>
<li>Nubank is strong in terms of its key fintech metrics and trends, such as revenue per user relative to its cost to serve and it has low customer acquisition costs </li>
<li>Nubank is a clear leading fintech benchmark; yet its challenges are its super-premium valuation in the face of unsettled markets, and the delivery of fast growth whilst controlling loan delinquency</li>
</ul>


Nubank, the leading digital native bank in Brazil and Latin America, by number of customers, has filed for an IPO with an indication valuation in excess of USD50bn 
Nubank is strong in terms of its key fintech metrics and trends, such as revenue per user relative to its cost to serve and it has low customer acquisition costs 
Nubank is a clear leading fintech benchmark; yet its challenges are its super-premium valuation in the face of unsettled markets, and the delivery of fast growth whilst controlling loan delinquency


Nubank Pre-IPO Research: Priced for Perfection?

<ul>
<li>Bradesco’s quarterly results disappointed the market due to soft interest margins, despite the clear indications of Bradesco’s improving returns and better credit quality metrics</li>
<li>NuBank is a digital bank success story, but it has credit quality challenges and also potential capital constraints, due to its fast loan growth</li>
<li>We remain neutral on Itaú and Banco do Brasil; Banco do Brasil seems attractive on valuations, but it is more exposed to political risk; buy Bradesco, sell Nubank</li>
</ul>


Bradesco’s quarterly results disappointed the market due to soft interest margins, despite the clear indications of Bradesco’s improving returns and better credit quality metrics
NuBank is a digital bank success story, but it has credit quality challenges and also potential capital constraints, due to its fast loan growth
We remain neutral on Itaú and Banco do Brasil; Banco do Brasil seems attractive on valuations, but it is more exposed to political risk; buy Bradesco, sell Nubank


Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

<ul>
<li>We stick with Bradesco as the key pick in big-cap Brazilian and LatAm banks, for its earnings recovery prospects; the very low PEG and PBV ratio reflect its re-rating potential</li>
<li>NuBank is a digital bank success story, but one that we see has challenges in terms of credit quality and it has potential capital constraints given its fast loan growth</li>
<li>We are neutral on Itaú and Banco do Brasil; Itaú seems to be fairly valued whilst Banco do Brasil is optically attractive, but it is more exposed to political risk</li>
</ul>


We stick with Bradesco as the key pick in big-cap Brazilian and LatAm banks, for its earnings recovery prospects; the very low PEG and PBV ratio reflect its re-rating potential
NuBank is a digital bank success story, but one that we see has challenges in terms of credit quality and it has potential capital constraints given its fast loan growth
We are neutral on Itaú and Banco do Brasil; Itaú seems to be fairly valued whilst Banco do Brasil is optically attractive, but it is more exposed to political risk


Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

Brazil

Itau Unibanco Holding S.A. attracts deposits and offer retail, commercial, corporate, and private banking services. The Bank offers consumer loans, financial management, insurance, pension plans, treasury services, mortgage loans, lease financing, securities brokerage, and foreign exchange services.

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Itau Unibanco Holding (ITUB4 BZ)

Nubank (NU US) – Gravity’s Pull and Key Business Factors

Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

Victor Galliano

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Nubank Pre-IPO Research: Priced for Perfection?

Nubank warrants a premium IPO valuation to other banks, but one that better accounts for the unsettled state of global markets and the potential...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Nubank (NU US) – Gravity’s Pull and Key Business Factors

​Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

Victor Galliano

GEM Banks; Conviction Calls for 2023

Our core buys are Bank Mandiri, Hana Financial, China Construction Bank and BanColombia; we also have special mention for Banco Itau and Nubank;...

Victor Galliano

Nubank Pre-IPO Research: Priced for Perfection?

Nubank warrants a premium IPO valuation to other banks, but one that better accounts for the unsettled state of global markets and the potential...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco Stays Our High Conviction Buy, Nubank Remains a Sell

​The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

Victor Galliano

Big-Cap Brazilian Commercial Banks; Bradesco (BBDC4 BZ), the Earnings Recovery Play

​With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...

Victor Galliano

Its recent share price correction and narrowing valuation gap leads us to recommend reducing short positions but, on balance, we remain negative...

The market has yet to recognise Bradesco’s improving returns and better credit quality, whilst Nubank faces credit quality challenges and...

With its strong earnings recovery potential, Bradesco remains our buy in Brazilian banks while NuBank faces credit quality and potential capital...