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

Juroku Financial Group / Equity Bottom-Up

<ul>
<li>We update twelve Japanese regional banks, and add two new names, to target beneficiaries of the improving interest rate outlook; also banks with attractive credit quality, capital adequacy and valuations</li>
<li>We identify the value of equity holdings for disposal among these banks; the lack of near-term easing prospects at the US Fed should support JGB yields and domestic bank valuations</li>
<li>We add smaller cap Juroku Financial to our buy list of Tokyo Kiraboshi Financial, Gunma Bank and higher risk option Suruga Bank</li>
</ul>


We update twelve Japanese regional banks, and add two new names, to target beneficiaries of the improving interest rate outlook; also banks with attractive credit quality, capital adequacy and valuations
We identify the value of equity holdings for disposal among these banks; the lack of near-term easing prospects at the US Fed should support JGB yields and domestic bank valuations
We add smaller cap Juroku Financial to our buy list of Tokyo Kiraboshi Financial, Gunma Bank and higher risk option Suruga Bank


Japanese Regional Banks – Adding a Smaller Cap to Our Key Positive Picks

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>About 10 days ago I put out a piece saying H1 guidance trends were such that a lot more banks would upgrade guidance before results. </li>
<li>More than two dozen did and the average guidance uplift is VERY high at +59%. The median uplift vs guidance for 35 banks guiding/reporting is +39% for H1. </li>
<li>The big wave of bank earnings is today through late next week. Megas at the end. Stay long banks. Megas. Cheap regionals. </li>
</ul>


About 10 days ago I put out a piece saying H1 guidance trends were such that a lot more banks would upgrade guidance before results. 
More than two dozen did and the average guidance uplift is VERY high at +59%. The median uplift vs guidance for 35 banks guiding/reporting is +39% for H1. 
The big wave of bank earnings is today through late next week. Megas at the end. Stay long banks. Megas. Cheap regionals. 


Japan 2024 H1 Bank Guidance/Results - Better and Better

<ul>
<li>So far, 10 regional banks have upgraded guidance since Q1 results. One of them (Iyogin) twice. The average gain is +71.7% vs original H1 guidance (if we count Iyogin once).</li>
<li>This week will be the big push for new guidance ahead of a flood earnings reports the following week. Election results will cause concern, and the BOJ meets Thursday.</li>
<li>I expect a move in December (positive for banks), but it may be US Fed and $/¥-dependent. In the meantime banks enjoy tailwinds.</li>
</ul>


So far, 10 regional banks have upgraded guidance since Q1 results. One of them (Iyogin) twice. The average gain is +71.7% vs original H1 guidance (if we count Iyogin once).
This week will be the big push for new guidance ahead of a flood earnings reports the following week. Election results will cause concern, and the BOJ meets Thursday.
I expect a move in December (positive for banks), but it may be US Fed and $/¥-dependent. In the meantime banks enjoy tailwinds.


Japan 2024 H1 Bank Guidance: Interest/Fees ⬆︎, Expenses/Credit Costs⬇︎ - Opportunity Good Still

<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

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

On Friday 1 October 2020, three new regional bank holding companies will be created and listed the same day on the Tokyo Stock Exchange.  The establishment of a regional bank holding company in Japan is not new news, but these three will in future set up entirely non-financial subsidiaries as a means of broadening group revenues and profitability.  This is a notable change in bank thinking.Japanese financial authorities have been keen to encourage regional banks to merge in the belief that a reduction in the number of banks will lead to greater efficiencies and a greater willingness to lend, but this has had very mixed results.  What the financial authorities have so far failed to do has been to encourage the banks to adopt a radically differentiated business model, or seriously address the issue of proper risk asset pricing, or improve operating margins, or enhance shareholder returns.  This may be about to change. The kiki-kan  危機感 or ‘sense of crisis’ that appears to be the necessary catalyst to get Japanese banks to abandon their habitual ‘business as usual’ approach and take decisive action, may be finally emerging among the Japanese regional banking fraternity.It’s about time.

On Friday 1 October 2020, three new regional bank holding companies will be created and listed the same day on the Tokyo Stock Exchange.  The establishment of a regional bank holding company in Japan is not new news, but these three will in future set up entirely non-financial subsidiaries as a means of broadening group revenues and profitability.  This is a notable change in bank thinking.Japanese financial authorities have been keen to encourage regional banks to merge in the belief that a reduction in the number of banks will lead to greater efficiencies and a greater willingness to lend, but this has had very mixed results.  What the financial authorities have so far failed to do has been to encourage the banks to adopt a radically differentiated business model, or seriously address the issue of proper risk asset pricing, or improve operating margins, or enhance shareholder returns.  This may be about to change. The kiki-kan  危機感 or ‘sense of crisis’ that appears to be the necessary catalyst to get Japanese banks to abandon their habitual ‘business as usual’ approach and take decisive action, may be finally emerging among the Japanese regional banking fraternity.It’s about time.

Japanese Regional Banks:  Dancing On Their Own

Japan

The Juroku Bank, Ltd. is a regional bank based in Gifu prefecture.  The Bank provides banking services such as deposits, loans, foreign exchange transactions, and securities investments.  The Juroku Bank also provides financial services such as leasing, credit cards, letter of credit, and loans.

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Juroku Financial Group (7380 JP)

Japanese Regional Banks – Adding a Smaller Cap to Our Key Positive Picks

Aside from the usual metrics, we add regional banks' cross-shareholdings as a share of market cap; smaller cap Juroku Financial added to buy list...

Victor Galliano

Japan 2024 H1 Bank Guidance/Results - Better and Better

This AM has a Nikkei headline saying Japan's 3 megabanks will report ¥2.0trln in Net Profit in H1. That compares to ¥894bn last year, and ¥3.3trln...

Travis Lundy

Japan 2024 H1 Bank Guidance: Interest/Fees ⬆︎, Expenses/Credit Costs⬇︎ - Opportunity Good Still

10 of about 70 Japanese regional banks have revised guidance for the H1 to end-Sep 2024. The average gain is near 70% vs previous guidance. That's...

Travis Lundy

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 Regional Banks: Dancing On Their Own

The ‘sense of crisis’ that Japanese banks need to abandon their habitual ‘business as usual’ approach and take decisive action may be finally...

J. Brian Waterhouse

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Regional Banks – Adding a Smaller Cap to Our Key Positive Picks

​Aside from the usual metrics, we add regional banks' cross-shareholdings as a share of market cap; smaller cap Juroku Financial added to buy list...

Victor Galliano

Japan 2024 H1 Bank Guidance/Results - Better and Better

This AM has a Nikkei headline saying Japan's 3 megabanks will report ¥2.0trln in Net Profit in H1. That compares to ¥894bn last year, and ¥3.3trln...

Travis Lundy

Japan 2024 H1 Bank Guidance: Interest/Fees ⬆︎, Expenses/Credit Costs⬇︎ - Opportunity Good Still

10 of about 70 Japanese regional banks have revised guidance for the H1 to end-Sep 2024. The average gain is near 70% vs previous guidance. That's...

Travis Lundy

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 Regional Banks: Dancing On Their Own

The ‘sense of crisis’ that Japanese banks need to abandon their habitual ‘business as usual’ approach and take decisive action may be finally...

J. Brian Waterhouse

Aside from the usual metrics, we add regional banks' cross-shareholdings as a share of market cap; smaller cap Juroku Financial added to buy list...