Financials
After earnings beats from JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, PNC as well as Citi why were all the other banks up significantly and Citi was down 5%? Charles Peabody discusses asset caps (Citi is already shrinking itself by shedding its global consumer bank, so an asset cap makes no sense whatsoever) and a probable delay in the Banamex IPO. He argues Citi is one of the best stories in large cap financials and is the only company able to repurchase large amounts of its common stock at a substantial discount to TBV. Expectations are low, the regulatory pressure is high and management is doing all the right things.
Edition: 197
- 18 October, 2024
Financials
Charles Peabody upgrades the stock to Buy - he believes the marketplace will begin to appreciate the integrity of Citi’s balance sheet as management executes on its goals. Charles is projecting a $75 price target based on an 8.5% RoTCE and a projected TBV of $88 by the end of 2023. He thinks that following the successful sale of most of its international consumer banking operations, including Banamex, Citi could resume stock buybacks in the $3-4bn range in 2H23. The stock trades at less than an 8 P/E, 62% of last year’s TBV and offers a 4% dividend.
Edition: 155
- 03 March, 2023
Banorte (GFNORTEO MM) Mexico
Financials
Galliano's Financials Research
Withdrawal from Banamex bidding is positive, but current valuations don't reflect 2023 risks - Victor Galliano highlights the pressure on credit spreads from rising funding costs in the system; Banorte, despite its loan to deposit ratio of 101%, has avoided this so far by improving its funding mix but this can't continue indefinitely. There are early signs that credit quality may be worsening, despite the benign NPL trends, stage 2 loans increased from 0.85% in 2Q22 to 1.09% in 3Q22. Going forward, non-bank subsidiaries may also prove harder to continue to squeeze higher returns and the investment in the digital bank adds to opex.
Edition: 147
- 28 October, 2022
BBVA (BBVA SM) Spain
Financials
Galliano's Financials Research
Digital strategy is being successfully rolled out to all its geographies - current valuation does not reflect BBVA's competitive attributes and strengths. Forecast dividend yield is over 7%. BBVA's premium returns engine is Mexico, where it is well positioned to counter the threat from FinTechs, as well as exploit the Citibanamex sale process to selectively poach disillusioned clients. This is supported by improving returns in Spain where BBVA remains a digital transformation leader. In addition, Turkey offers exciting growth potential and with the latest offer BBVA should be buying out the Garanti minorities at an attractive price.
Edition: 135
- 13 May, 2022
Financials
Downgrades to Sell following 4Q21 results - Charles Peabody cuts his 2022 EPS estimate from $7.50 to $6.65, which implies an RoTCE of ~8.5%. Capital returns should prove constrained and uneven. The fourth quarter fundamental metrics were weak, the monetisation of Banamex will take time to accomplish and the much-anticipated March Investor Day is likely to show that any turnaround is going to be a slow, grind-it-out, multi-year process. In short, there’s no silver bullet that will get Citi back to a 12% RoTCE anytime soon, and those returns are still likely to prove to be subpar relative to its peer group. TP $55 by summer 2022.
Edition: 128
- 04 February, 2022
Financials
Galliano's Financials Research
Citi to sell its Mexican retail and SME banking operations - “new Banamex” is worth USD7-10bn according to Victor Galliano. Grupo Salinas owned Banco Azteca seems a strong candidate to make a bid, especially since Ricardo Salinas is close to the Lopez Obrador government. Carlos Slim’s Inbursa could also be a good fit. Both potential bidders are likely to attracted by the deposit rich nature of the Banamex franchise, as well as the capillarity of the branch network, even in these increasingly digital times.
Edition: 127
- 21 January, 2022