Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Accelerating Tomorrow’s Independent Research

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Equity Bottom-Up

<ul>
<li>A rising pro-market tide has lifted the big-cap banks, but now it is time to be more selective. We see further potential for stock re-rating among the Brazilian banks, as the new Bolosonaro administration executes its pro-market policies.</li>
<li>Our top pick is <a href="https://www.smartkarma.com/entities/24564" target="_blank">Banco Do Brasil Sa (BdoBAS3 BZ)</a> , with a target price of BRL57, which implies 19% re-rating potential. We believe that Banco do Brasil (BdoB) shareholders are set to benefit from less of a “social programme” agenda which in turn should help improve ROE going forward.</li>
<li>Yet the PBV discount between BdoB and its private sector peers - especially against Itaú Unibanco at 52% - has barely narrowed, and we believe that the discount has potential to narrow further as BdoB’s ROE expands and narrows the gap with its private sector peers.</li>
</ul>


A rising pro-market tide has lifted the big-cap banks, but now it is time to be more selective. We see further potential for stock re-rating among the Brazilian banks, as the new Bolosonaro administration executes its pro-market policies.
Our top pick is Banco Do Brasil Sa (BdoBAS3 BZ) , with a target price of BRL57, which implies 19% re-rating potential. We believe that Banco do Brasil (BdoB) shareholders are set to benefit from less of a “social programme” agenda which in turn should help improve ROE going forward.
Yet the PBV discount between BdoB and its private sector peers - especially against Itaú Unibanco at 52% - has barely narrowed, and we believe that the discount has potential to narrow further as BdoB’s ROE expands and narrows the gap with its private sector peers.


Brazil Banks: Banco Do Brasil Focus - Prospects for Improved Returns, Narrowing PBV Discount