Big cap GEM Bank investment recommendations for 2024

Financials

Galliano's Financials Research

Victor Galliano favours four longs and one short as his conviction calls for the year ahead. 1) Bank Mandiri (Indonesia) continues to generate improving returns and has strong capital ratios, credit quality and liquidity metrics. 2) KB Financial (South Korea) is a deep value pick. 3) China Merchants Bank is a contrarian pick, which looks well positioned to confront concerns re. Chinese NPLs and also on very attractive valuations. 4) Banco do Brasil screens well re. valuations and returns; its growth potential also looks particularly appealing. 5) Victor’s key sell is Kotak Mahindra Bank (India) as it is richly valued, exposed to low prospective earnings growth and has low credit quality coverage.

- 12 January, 2024

Kotak Mahindra Bank (KMB IN) India

Financials

Hemindra Hazari

The backdoor entry of Uday Kotak into the board of directors of KMB after he steps down as the CEO at the end of the year should be recognised for what it is, namely, a method of exercising control over the bank without being saddled with executive responsibilities. This decision also reflects poorly on the board of directors for not taking CEO succession seriously for two decades. When a prominent entity in the financial system has a history of disdain towards the regulators and finds loopholes to permit the founder to exercise control, stakeholders should be concerned.

- 28 April, 2023