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.

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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>Brazil’s credit quality trends to September are diverging, with individual trends deteriorating and corporates improving</li>
<li>System loan growth was 16% on a YoY basis in September from 15.9% in August, driven by faster growth in household loans</li>
<li>Compared to August, consumer credit quality worsened across the board to September with household arrears (15-90 days delay) also deteriorating MoM</li>
<li>Credit quality of corporates, based on the data in our charts, was almost entirely positive to September with default rates further improved for all corporate types</li>
<li>The NPL ratio worsened further in the case of private international banks, whilst domestic banks NPL ratio improved MoM</li>
<li>Credit spreads edged higher in September, on a MoM basis, with the sharp rise in benchmark rates expected to feed through with a time lag</li>
<li>We remain constructive on the Brazil bank sector, and see that the latest data is supportive of public domestic banks; we retain our positive view on <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a> </li>
<li>Risks to positive view on these big cap Brazil banks include worse than expected credit quality, weak opex control and erosion of credit spreads</li>
</ul>


Brazil’s credit quality trends to September are diverging, with individual trends deteriorating and corporates improving
System loan growth was 16% on a YoY basis in September from 15.9% in August, driven by faster growth in household loans
Compared to August, consumer credit quality worsened across the board to September with household arrears (15-90 days delay) also deteriorating MoM
Credit quality of corporates, based on the data in our charts, was almost entirely positive to September with default rates further improved for all corporate types
The NPL ratio worsened further in the case of private international banks, whilst domestic banks NPL ratio improved MoM
Credit spreads edged higher in September, on a MoM basis, with the sharp rise in benchmark rates expected to feed through with a time lag
We remain constructive on the Brazil bank sector, and see that the latest data is supportive of public domestic banks; we retain our positive view on Banco Do Brasil Sa (BBAS3 BZ) 
Risks to positive view on these big cap Brazil banks include worse than expected credit quality, weak opex control and erosion of credit spreads


Brazil Banking Data Trends to September in Ten Charts – Credit Quality Divergence

Banco do Brasil

Brazil Banking Data Trends to September in Ten Charts – Credit Quality Divergence