Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering the Italian banks. He has worked in sell side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings and NatWest.
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.

Financials & FinTech research

Merger Undone: Tougher Outlook for Sabadell, BBVA Plans Buybacks and EM M&A

European Banks: 2Q20 Capital & Credit Quality Screens

Caixabank-Bankia: ROE Boosting Digital Opportunity

BBVA: So Long, Sun-Belt – What Next; Buybacks and Potentially M&A?

Caixabank-Bankia: Share Exchange Tug-Of-War, in a Merger of Unequals

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.

Event-Driven

<ul>
<li>A merged BBVA-Sabadell would be the second largest Spanish bank by domestic assets, and one with substantial potential for branch network streamlining and cost savings supported by BBVA’s digital expertise</li>
<li>The big challenge in this process is TSB, <a href="https://www.smartkarma.com/entities/banco-de-sabadell-sa" target="_blank" data-smartkarma-citation="entities:21295:1" rel="noopener">Banco De Sabadell Sa (SAB SM)</a>’s loss-making UK subsidiary, which is, ideally, a disposal candidate</li>
<li>Sabadell’s low PBV ratio reflects, in part, Sabadell’s relatively low Spanish NPL coverage and, more importantly, the TSB “drag”</li>
<li>There is some activity in the M&amp;A market for small UK banks, as we will focus on in this report, but pricing is likely to be depressed</li>
<li>In the event of a successful TSB disposal, and given the <a href="https://www.smartkarma.com/entities/banco-bilbao-vizcaya-argentari" target="_blank" data-smartkarma-citation="entities:21251:1" rel="noopener">Banco Bilbao Vizcaya Argentari (BBVA SM)</a>  merger talks, we believe that Sabadell would justify a further 20-25% premium to its current market value</li>
<li>An alternative, and sub-optimal, path would be to retain TSB post-restructuring (2022-23), and extract better value from the sale, but this would be a management distraction from the prospective Sabadell-BBVA merger of the Spanish operations</li>
<li>Risks to our positive view on Sabadell include the failure to agree on merger terms between the two parties, resulting in a termination of discussions; also poorer than expected performance from TSB’s restructuring programme and continued headwinds on credit quality</li>
</ul>


A merged BBVA-Sabadell would be the second largest Spanish bank by domestic assets, and one with substantial potential for branch network streamlining and cost savings supported by BBVA’s digital expertise
The big challenge in this process is TSB, Banco De Sabadell Sa (SAB SM)’s loss-making UK subsidiary, which is, ideally, a disposal candidate
Sabadell’s low PBV ratio reflects, in part, Sabadell’s relatively low Spanish NPL coverage and, more importantly, the TSB “drag”
There is some activity in the M&amp;A market for small UK banks, as we will focus on in this report, but pricing is likely to be depressed
In the event of a successful TSB disposal, and given the Banco Bilbao Vizcaya Argentari (BBVA SM)  merger talks, we believe that Sabadell would justify a further 20-25% premium to its current market value
An alternative, and sub-optimal, path would be to retain TSB post-restructuring (2022-23), and extract better value from the sale, but this would be a management distraction from the prospective Sabadell-BBVA merger of the Spanish operations
Risks to our positive view on Sabadell include the failure to agree on merger terms between the two parties, resulting in a termination of discussions; also poorer than expected performance from TSB’s restructuring programme and continued headwinds on credit quality


Banco De Sabadell (SAB SM): TSB, Fly in the Merger Ointment

Banco De Sabadell SA

Banco De Sabadell (SAB SM): TSB, Fly in the Merger Ointment