Financials

Report by Galliano's Financials Research

Victor Galliano has lightened positions in Japanese banks, retaining those with larger cross-holdings relative to market cap, which he expects to benefit under an easier-for-longer monetary policy. He argues that managements’ commitment to realise cross-holding value through disposals should be a key near-term driver of share performance. Despite potential delays to further rate hikes, lending rates and net interest margins have continued to rise since the end of NIRP, supported by low delinquency levels. Combined with attractive valuations, these trends should underpin higher medium-term multiples. Among large caps, he keeps Resona and Shizuoka as Buys (downgrading Mizuho to Neutral) and among mid-caps, maintains Buys on Iyogin, Hokuhoku and Hachijuni, while downgrading Hirogin to Neutral.

Financials

Report by Galliano's Financials Research

The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10-year JGBs, making it “a reference” and allowing yields to exceed it. 10-year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating rate credit exposures. In Aug, Victor Galliano identified Resona, Mizuho and SMFG as his picks for a steepening yield curve. In Oct, he added Hachijuni as the deep value buy. Now, he adds Concordia for its high share of floating rate lending.