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>In the post meeting press briefing, governor Kazuo Ueda said there was an increasing chance of the BoJ's 2% inflation target being hit; JGB 10Y yields rose as a result</li>
<li>This implies that the BoJ could change from negative interest rate policy in the near future, perhaps as soon as March, which is positive for the Japanese bank sector’s fundamentals</li>
<li>We believe that this new will give further impetus to Japanese bank shares, especially those banks that are well geared into rising domestic interest rates; we highlight eight banks</li>
</ul>


In the post meeting press briefing, governor Kazuo Ueda said there was an increasing chance of the BoJ's 2% inflation target being hit; JGB 10Y yields rose as a result
This implies that the BoJ could change from negative interest rate policy in the near future, perhaps as soon as March, which is positive for the Japanese bank sector’s fundamentals
We believe that this new will give further impetus to Japanese bank shares, especially those banks that are well geared into rising domestic interest rates; we highlight eight banks


Bank of Japan Meeting Signals– Our Take on the Implications for Japanese Banks

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

<ul>
<li>ROE is now 24.4% in 1H24 compared with 18.0% last year. ROE consistently rising well, from 15.9% in FY21. </li>
<li>Quarterly net profit up 47% YoY in 2Q24. On an annualized basis, net profit in FY24 can show considerable delta from FY23, a year when returns and profit were good.</li>
<li>Costs are well-contained. SG&amp;A to assets was 23.7% at its recent peak and now it's 20.8%. SG&amp;A to revenue is now 55.5% compared with 65.3% at its recent peak.</li>
</ul>


ROE is now 24.4% in 1H24 compared with 18.0% last year. ROE consistently rising well, from 15.9% in FY21. 
Quarterly net profit up 47% YoY in 2Q24. On an annualized basis, net profit in FY24 can show considerable delta from FY23, a year when returns and profit were good.
Costs are well-contained. SG&amp;A to assets was 23.7% at its recent peak and now it's 20.8%. SG&amp;A to revenue is now 55.5% compared with 65.3% at its recent peak.


SPARX - Sharply Expanding ROE, 1H24 Profit Annualized Surges YoY, FUM Strongly Up, Costs Contained

Mizuho Financial Group / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mizuho-financial-group-inc" target="_blank" data-smartkarma-citation="entities:219:1" rel="noopener">Mizuho Financial Group (8411 JP)</a> can see higher profit guidance change than many in Japan, the region, given its first quarter was 40% of full-year guidance</li>
<li>Riding JGB yields will support this, with less loans to total financial assets, and the bank has even seen its unrealized losses on JGBs decline. Good ALM.</li>
<li>Credit metrics are better. Its credit costs are in reversal. This can continue or at least remain low. This is supported by granular, macro data. </li>
</ul>



Mizuho Financial Group (8411 JP) can see higher profit guidance change than many in Japan, the region, given its first quarter was 40% of full-year guidance
Riding JGB yields will support this, with less loans to total financial assets, and the bank has even seen its unrealized losses on JGBs decline. Good ALM.
Credit metrics are better. Its credit costs are in reversal. This can continue or at least remain low. This is supported by granular, macro data. 


Mizuho - Expect Profit Guidance Surge | JGBs Up, JGBs Unrealized Losses Down | Credit Metrics Better

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 bank is seeing high growth in cash and deposits, with loans in decline, and the composition moving more toward government and corporate loans</li>
<li>ALM does not appear strong, and without any easy way to reduce operating costs, the bank is now seeing cost/income surge to 74%</li>
<li>Credit metrics on surface may appear fine, but the 47% QoQ rise in provision costs, suggests to us provisions were cut too much last year, and now there is normalization</li>
</ul>


The bank is seeing high growth in cash and deposits, with loans in decline, and the composition moving more toward government and corporate loans
ALM does not appear strong, and without any easy way to reduce operating costs, the bank is now seeing cost/income surge to 74%
Credit metrics on surface may appear fine, but the 47% QoQ rise in provision costs, suggests to us provisions were cut too much last year, and now there is normalization


Suruga Bank - Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ

Japan

Suruga Bank Ltd. is a Shizuoka based regional bank mainly operating in the Kanto area (central eastern part of Japan) including Tokyo.  The Bank provides deposits, loans, and foreign exchange transactions.  The Suruga Bank also provides financial services such as leasing, letter of credit, and credit cards services.

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Suruga Bank Ltd (8358 JP)

Bank of Japan Meeting Signals– Our Take on the Implications for Japanese Banks

BoJ's inflation target of 2% looks increasingly like it will be reached will should drive the shift from negative interest rate policy, boosting...

Victor Galliano

SPARX - Sharply Expanding ROE, 1H24 Profit Annualized Surges YoY, FUM Strongly Up, Costs Contained

Continuously expanding ROE now to 24%, profit growth at 47% YoY in the quarter, can mean an exceptionally strong full year. Costs are well...

Daniel Tabbush

Mizuho - Expect Profit Guidance Surge | JGBs Up, JGBs Unrealized Losses Down | Credit Metrics Better

Mizuho can see major rise in its profit guidance, since it has met 40% of target in first quarter, also due to rising JGB yields, better loan...

Daniel Tabbush

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

Suruga Bank - Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ

Cash is up a lot but loans are down a lot with sharply higher deposits, not the best ALM. Cost/income ratio is now 74%, not easy to cut costs...

Daniel Tabbush

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