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

HSBC (HSBA LN): The Super-Tanker Is Turning

European Bank Screens 4Q20 – Our Picks in the Rotation to Value

Mexican Banks; an Early Look at 2021 Data

Banorte (GFNORTEO MM): Prepared for the Next Wave…of NPLs

Banorte (GFNORTEO MF) To Boost Provisions; November Banks Data in Charts Reflects System’s Strength

Banorte(GFNORTEO MM): Triple Hit in 4Q20 Lays the Foundation for Healthy Dividend Resumption in 2021

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

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

Grupo Financiero Banorte SAB d / Equity Bottom-Up

Grupo Financiero Banorte SAB d (GFNORTEO MF)

<ul>
<li>Payment holidays and deferrals on loans came to an end in 4Q20 in Mexico, and this is reflected in the credit quality metrics</li>
<li>Loan balances fell in the year, as shown in Figure 2</li>
<li>We are starting to see the impact of the end of pandemic programmes, such as loan payment holidays and deferrals, translating into higher delinquency</li>
<li>Consequently, the rising cost of risk impacted Mexican bank sector returns for the full year, as shown in Figure 4</li>
<li>Yet banks seem well provisioned with system NPL coverage at 160% at YE 2020, and Banorte’s at 228%</li>
<li>We reiterate our positive view on <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MF)</a>, and believe that it is in a stronger position than BBVA Bancomer and <a href="https://www.smartkarma.com/entities/banco-santander-mexico-sa-in" target="_blank" data-smartkarma-citation="entities:27672:1" rel="noopener">Banco Santander Mexico-B (BSMXB MM)</a> in terms of restructurings and deferrals; <a href="https://www.smartkarma.com/entities/grupo-financiero-inbursa-o" target="_blank" data-smartkarma-citation="entities:24776:1" rel="noopener">Grupo Financiero Inbursa-O (GFINBURO MM)</a> also seems to screen well, in our view</li>
<li>Risks to our positive view on Banorte include much worse than expected delinquency, especially in the consumer and SME segments, as a result of the pandemic induced economic contraction driving worse than expected cost of risk</li>
</ul>


Payment holidays and deferrals on loans came to an end in 4Q20 in Mexico, and this is reflected in the credit quality metrics
Loan balances fell in the year, as shown in Figure 2
We are starting to see the impact of the end of pandemic programmes, such as loan payment holidays and deferrals, translating into higher delinquency
Consequently, the rising cost of risk impacted Mexican bank sector returns for the full year, as shown in Figure 4
Yet banks seem well provisioned with system NPL coverage at 160% at YE 2020, and Banorte’s at 228%
We reiterate our positive view on Grupo Financiero Banorte-O (GFNORTEO MF), and believe that it is in a stronger position than BBVA Bancomer and Banco Santander Mexico-B (BSMXB MM) in terms of restructurings and deferrals; Grupo Financiero Inbursa-O (GFINBURO MM) also seems to screen well, in our view
Risks to our positive view on Banorte include much worse than expected delinquency, especially in the consumer and SME segments, as a result of the pandemic induced economic contraction driving worse than expected cost of risk


Mexican Banks YE 2020 Credit Quality Data Points; Banorte Screens Better than Peers