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Fundamental View
AS OF 27 Mar 2025ICICI Bank is one of the leading private banks in India and has a good diversified business model, with well regarded life and general insurance subsidiaries.
Under its previous CEO, the bank suffered setbacks from sizeable bad debt problems in FY17/18, but the situation has since stabilised following a leadership change and the bank has done well ever since.
Business Description
AS OF 27 Mar 2025- The original Industrial Credit and Investment Corporation of India (ICICI) was established in 1955 by the World Bank, the Government of India and representatives of Indian industry as a financial institution to provide Indian businesses with medium and long-term project financing.
- In 1994, ICICI established a commercial banking subsidiary, ICICI Bank as India's financial sector opened up, and in 2002 ICICI merged with ICICI Bank, keeping the latter's name.
- Retail now accounts for 52% of its loan book, corporates are at 21%, while rural and business banking & SMEs are at 6% and 19% respectively, and overseas (which is being de-emphasised) consists of just 2% at F3Q25.
- The bank has well regarded life insurance (ICICI Prudential) and general insurance (ICICI Lombard) businesses.
Risk & Catalysts
AS OF 27 Mar 2025India banking system liquidity is tight and so the Indian banks have moderated their loan growth to minimize the impact on NIMs and returns, and as the RBI has guided banks to align their loan and deposit growth. ICICI however has continued to deliver both relatively strong loan and deposit growth momentum, while maintaining its leading LDR and profitability, in testament to its strong franchise.
The RBI has commenced the rate cutting cycle with a 25 bp reduction in February, and we do anticipate more rate cuts to come through which will feed through to lower NIMs over the coming quarters.
We are cautious about Indian unsecured retail and microfinance given a stretched urban middle and lower-middle class consumer with high inflation and interest costs, and economic activity in India has slowed as we had anticipated. ICICI’s earlier prudence towards the segment than peers however is keeping asset quality well controlled. We are watchful though of the MSME and business banking segments where growth has been brisk.
Leadership and governance issues under the previous CEO Ms. Chanda Kochhar have been dealt with well, since her replacement in Oct-18.
Key Metric
AS OF 27 Mar 2025| INR bn | FY21 | FY22 | FY23 | FY24 | 9M25 |
|---|---|---|---|---|---|
| NIM | 3.69% | 3.96% | 4.48% | 4.53% | 4.29% |
| ROAA | 1.39% | 1.77% | 2.13% | 2.37% | 2.37% |
| ROAE | 12.3% | 14.7% | 17.2% | 18.7% | 18.2% |
| Equity/Assets | 12.0% | 12.1% | 12.6% | 12.7% | 13.4% |
| CET1 Ratio | 16.7% | 17.3% | 16.9% | 15.4% | 13.9% |
| Gross NPA Ratio | 4.96% | 3.60% | 2.81% | 2.16% | 1.96% |
| Provisions/Loans | 2.05% | 0.97% | 0.65% | 0.30% | 0.37% |
| PPP ROA | 3.13% | 2.97% | 3.28% | 3.36% | 3.41% |
CreditSight View Comment
AS OF 05 May 2025ICICI Bank is a preferred name among the Indian FIs we cover. We like the bank’s robust capital and loan loss buffers, strong asset quality, as well as peer leading margins, profitability and liquidity position. Under its previous CEO, the bank suffered setbacks from sizable bad debt problems in FY17/18 but the situation has since stabilised following a leadership change. The bank has emerged stronger from a capital, asset quality and earnings perspective, as it de-risked its book, and took pro-active actions to protect its capital by raising equity and selling small stakes in its well-regarded insurance subsidiaries to raise funds and set aside more general provisions. ICICI last issued a $ bond in 2017.
Recommendation Reviewed: May 05, 2025
Recommendation Changed: December 07, 2020
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Search topics about wealth insights and investments.State Bank of India
- Sector: Financial Services
- Sub Sector: Banks
- Country: India
- Bond: SBIIN 4.875 28
- Indicative Yield-to-Maturity (YTM): 5.23%
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Fundamental View
AS OF 27 Mar 2025State Bank of India (SBI) is the largest state-owned bank in India and is in some respects the country’s flagship bank. Given the bank’s ~57% government ownership and systemic importance, government support for SBI is very strong.
The bank’s capital buffers are relatively low, but we take comfort in the strong government support.
Business Description
AS OF 27 Mar 2025- State Bank of India is the largest commercial bank in India. Its predecessor banks date back to the 19th century. In the early 20th century, they merged to form the Imperial Bank of India, which became the State Bank of India after India gained independence in 1947.
- The Government of India remains the largest shareholder with a 56.92% stake. Per the SBI Act, the government's shareholding cannot fall below 55%.
- SBI's merged with its 5 associate banks and Bharatiya Mahila Bank in 2018. The merger catapulted SBI into one of the world's 50 largest banks.
- The bank has 85% of its loans in the domestic market, and has steadily increased its international business too over the past few years with offices across all international business centres. The domestic book is split 42% retail, 34% corporates, ~14% SMEs and ~10% to the agri segment as of end-December 2024.
- It has diversified its operations with well regarded subsidiaries in the areas of fund management, credit cards, insurance, and capital markets.
Risk & Catalysts
AS OF 27 Mar 2025SBI does not have a strong buffer vs. the regulatory minimum of 8%, but its size, systemic importance and majority government shareholding confer particularly strong government support. But consequentially, any deterioration in the sovereign ratings will also affect the bank’s credit.
Increasing consolidation in the country’s financial space may narrow the gap between SBI’s market leading position vs its peers, particularly HDFC Bank.
Continued tight system liquidity has led to pressure on margins and loan growth of the Indian banks, but SBI’s less tight liquidity position than its private sector peers has allowed it to buck the industry trend and record relatively brisk loan growth that is ahead of deposit growth.
Asset quality is also trending well despite a stretched urban middle and lower-middle class consumer class, and slower than anticipated economic activity in India, as SBI’s personal unsecured loans book is ~95% to salaried employees of top tier corporates and the government.
Key Metric
AS OF 27 Mar 2025| INR mn | FY21 | FY22 | FY23 | FY24 | 9M25 |
|---|---|---|---|---|---|
| NIM | 3.04% | 3.12% | 3.37% | 3.28% | 3.12% |
| ROAA | 0.48% | 0.67% | 0.96% | 1.04% | 1.09% |
| ROAE | 8.4% | 11.9% | 16.5% | 17.3% | 17.1% |
| Equity to Assets | 5.6% | 5.6% | 5.9% | 6.1% | 6.6% |
| CET1 Ratio | 10.3% | 10.3% | 10.6% | 10.6% | 9.8% |
| Gross NPA Ratio | 4.98% | 3.97% | 2.78% | 2.24% | 2.07% |
| Provisions/Loans | 1.77% | 0.91% | 0.54% | 0.14% | 0.30% |
| PPP ROA | 1.65% | 1.58% | 1.59% | 1.60% | 1.65% |
CreditSight View Comment
AS OF 06 May 2025SBI is India’s largest bank and a well-run franchise. Government support underpins SBI’s relative positioning, while fundamentally, it has good operating metrics and business plans, a sufficient (though could be higher) CET1 ratio, and the best management among the public sector banks. SBI’s less tight LDR position than its private sector peers has allowed it to have continued higher loan growth than deposit growth in in F9M25. India’s macro backdrop remains relatively robust and SBI’s lower risk personal unsecured loans clientele is supporting asset quality well. Rate cuts will feed through to the NIM in FY26. Improved system liquidity however will provide some support for the NIM and loan growth. We like the name, but move it back to M/P as it now trades a few bp inside HDFCB.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: April 25, 2025
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Fundamental View
AS OF 26 Mar 2025Absent the potential increase in leverage and complexities of integrating the business with Nissan, Honda management is returning its focus to increasing the production and sale of hybrid vehicles while accelerating investments in electric vehicles to potentially catch up to competitors in China and other markets. The company’s plan to repurchase up to 24% of its outstanding shares in 2025 remains intact but should not adversely impact the company’s fortress balance sheet.
Business Description
AS OF 26 Mar 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 26 Mar 2025Management raised its FY25 motorcycle wholesales forecast by 2% but lowered its automobile wholesales forecast for the third consecutive quarter, this time by as modest 1% after decreases of 3% and 5% the previous two quarters. Motorcycle wholesales are now projected to increase 9% YoY, driven by growth in Asia (+9%) – which is expected to account for 85% of total motorcycle wholesales – along with growth in all other regions. The company’s lower automobile wholesale forecast is driven by a downward revision in Japan and Europe, with the former related to the increasingly competitive environment in that country.
Management maintained its FY25 consolidated operating profit forecast but noted some underlying changes to the composition of the forecast. It expects FY25 profit to be reduced by lower automobile unit sales, lower price and higher cost revisions, and increased expenses, all of which are projected to be offset by a favorable currency impact. Consolidated operating profit margins of 6.6% in FY25 were revised lower by 20 bp and are also expected to be 20 bp lower on a YoY basis.
Key Metric
AS OF 26 Mar 2025| $ mn | FY21 | FY22 | FY23 | FY24 | F3Q25 |
|---|---|---|---|---|---|
| Total Company Earning Assets | 76,778 | 71,105 | 65,363 | 74,626 | 81,564 |
| Cash and Investments | 1,870 | 2,607 | 1,544 | 1,670 | 1,591 |
| Excess Liquidity | 8,870 | 9,607 | 8,544 | 8,670 | 8,591 |
| Unsecured Debt | 43,037 | 38,026 | 33,410 | 41,566 | 46,548 |
| Secured Debt | 8,890 | 8,888 | 6,927 | 9,351 | 11,007 |
| Total Debt | 51,927 | 46,914 | 40,337 | 50,917 | 57,555 |
| Allowance % Retail Rece. | 0.75% | 0.58% | 0.71% | 0.80% | 0.83% |
| Allowance / Net Charge-offs | 2.41x | 3.75x | 2.41x | 1.72x | 1.59x |
| Net Charge-offs % Avg. Receivable | 0.33% | 0.15% | 0.29% | 0.52% | 0.52% |
| 30+ Day Delinquency Rate | 0.7% | 1.1% | 1.2% | 1.2% | 1.6% |
CreditSight View Comment
AS OF 22 May 2025We are lowering our recommendation on Honda Motor Co. and American Honda Finance Corporation notes from Market perform to Underperform based on relative value and projected tariff costs that could lead to negative outlook revisions by Moody’s and Fitch, partially offset by tariff risk mitigation strategies that we believe could improve its profit outlook over the intermediate term.
Recommendation Reviewed: May 22, 2025
Recommendation Changed: May 15, 2025
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Fundamental View
AS OF 25 Mar 2025Toyota is back on the path to normalized production schedules following its vehicle certification challenges in Japan during 1H25 that disrupted production of certain models. The company expects 10 mn units of retail sales in FY25, which would enable it to retain its place as the leading global automaker by volume. Toyota expects sales of its hybrid electric vehicles (HEVs) to account for 46% of retail sales this year, up from 37% in FY24, which is beneficial to customers and the company alike as management claims its HEVs are more profitable than its ICE vehicles. While Toyota was late to the BEV party and BEVs account for a paltry 1% of its retail sales, it has made significant BEV investments that will support the rollout of new BEV models and volumes over the next couple years.
Business Description
AS OF 25 Mar 2025- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 25 Mar 2025Consolidated vehicle sales are expected to decline by less than 1% YoY, unchanged from last quarter but modestly below its initial FY25 expectation for a modest sales increase of less than 1%. While management affirmed its vehicle sales forecast, it changed the regional composition of sales by boosting its projected sales in North America and Europe while lowering its forecast for Japan, Asia, and other regions.
The company raised its FY25 revenue forecast by 2% from ¥46 tn to ¥47 tn based on the regional shift in expected sales and currency changes. Management also raised its FY25 consolidated operating income forecast to ¥4.7 tn, up 9% compared to its previous forecast of ¥4.3 tn. The higher guidance is based primarily on currency impacts (+7%), especially transactional currency impacts on exports to the US, lower material costs (+3%), and marketing efforts (+4%). These benefits are expected to be partially offset by higher expenses (-2%) and other items (-3%), including the Hino Motors certification debacle.
Key Metric
AS OF 25 Mar 2025| $ mn | FY21 | FY22 | FY23 | FY24 | F3Q25 |
|---|---|---|---|---|---|
| Total Company Earning Assets | 116,546 | 117,659 | 120,018 | 129,707 | 133,925 |
| Cash and Investments | 8,195 | 7,670 | 6,398 | 8,570 | 8,284 |
| Total Liquidity | 35,895 | 36,070 | 33,498 | 37,570 | 36,984 |
| Unsecured Debt | 85,513 | 82,288 | 78,949 | 88,083 | 89,994 |
| Secured Debt | 24,212 | 26,864 | 32,736 | 34,337 | 35,425 |
| Total Debt | 109,725 | 109,152 | 111,685 | 122,420 | 125,328 |
| Allowance % Retail Rece. | 1.64% | 1.66% | 1.83% | 1.81% | 1.80% |
| Allowance / Net Charge-offs | 4.50x | 6.68x | 3.03x | 2.32x | 2.02x |
| Net Charge-offs % Avg. Receivable | 0.39% | 0.26% | 0.63% | 0.82% | 0.89% |
| 30+ Day Delinquency Rate | 1.2% | 1.8% | 2.3% | 2.6% | 2.9% |
CreditSight View Comment
AS OF 22 May 2025Our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation is based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: May 22, 2025
Recommendation Changed: May 09, 2025
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Search topics about wealth insights and investments.SM Investments Corporation
- Sector: Banking and Real EstateRetail
- Sub Sector: Diversified Conglomerate
- Country: Philippines
- Bond: SMPM 5.375 29
- Indicative Yield-to-Maturity (YTM): 5.133%
- Credit Rating : Unrated
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Our View
AS OF 20 Mar 2025
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Search topics about wealth insights and investments.Mexico
- Bond: Mex 4.125 26
- Indicative Yield-to-Maturity (YTM): 4.365%
- Credit Rating : BBB
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Country Overview
AS OF 19 Mar 2025- Mexico, the second largest economy in Latin America and among the world’s top 15, generated an estimated GDP of USD 1.79 trillion in 2023. (World Bank, 2023).
- While the World Bank classifies Mexico as an “Upper-Middle Income, Developing” economy with a per capita GDP of USD 24,766.6 (2023), MSCI’s 2024 Market Classification Review designates it as an Emerging Market, indicating that it is adequate but still developing.
- Though a net importer, Mexico boasts a robust export sector, primarily in petroleum, digital processing units, and automobiles, which generated approximately USD 82.8 million in revenue (WITS, 2022). This economic activity is largely fueled by the services sector, contributing roughly 60% to GDP, and an increasingly skilled, yet affordable, workforce (Global Finance Magazine, 2024).
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Search topics about wealth insights and investments.T-Mobile US
- Sector: Technology Media and Telecommunications
- Sub Sector: Telecommunications
- Region: US
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Fundamental View
AS OF 18 Mar 2025We expect T-Mobile will maintain its position as the industry leader in postpaid phone net additions, service revenue and EBITDA growth in 2025. We think the company has significant subscriber runway remaining in the suburban/rural and enterprise markets.
Adjusted net leverage (2.4x at 4Q24) is 0.3x/0.5x lower than AT&T/Verizon. Relatively strong EBITDA growth and a modest dividend commitment results in greater financial flexibility than peers.
T-Mobile benefits from the strongest spectrum position in the industry, including an average of 181 MHz in the 2.5 GHz band, which results in better 5G network coverage than AT&T and Verizon.
Business Description
AS OF 18 Mar 2025- TMUS is the one of the top 3 U.S. wireless carriers and is owned ~50% by Deutsche Telekom (DT). On April 1, 2020, TMUS and S completed an all-stock merger, valuing S at an EV of approximately $59.7 bn.
- TMUS ended 4Q24 with ~130 mn customers, including 104 mn postpaid and 25 mn prepaid.
- TMUS reaches 330+mn POPs with its Extended Range 5G network (using the 600 MHz spectrum) and reaches 300mn customers with its Ultra Capacity 5G.
Risk & Catalysts
AS OF 18 Mar 2025Converged wireless/broadband offers from cable operators raises the risk of pricing pressure in the mature consumer wireless market.
The company has not shied away from acquisitions. T-Mobile recently acquired Mint Mobile and announced deals for US Cellular and two FTTH JVs (Lumos and MetroNet). So far, M&A has not had much impact on T-Mobile’s credit metrics, but further moves into FTTH may be received poorly by investors.
With T-Mobile’s credit rating now comfortably in the mid-BBB area and leverage in the vicinity of the group’s mid-2x target area, we expect the company’s capital allocation to shift toward shareholder returns.
Key Metric
AS OF 18 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 68,397 | 80,118 | 79,571 | 78,558 | 81,400 |
| Organic Revenue Growth | 5.8% | 7.3% | (0.7%) | (1.3%) | 3.6% |
| EBITDA | 24,557 | 26,924 | 27,821 | 29,428 | 31,864 |
| Adj. EBITDA Growth | 4.3% | (64.0%) | 33.9% | 5.8% | 8.3% |
| Adj. EBITDA Margin | 35.9% | 33.6% | 35.0% | 37.5% | 39.1% |
| CapEx % of Sales | 16.1% | 15.4% | 17.6% | 12.5% | 10.9% |
| Total Debt | 76,660 | 79,574 | 78,425 | 83,586 | 84,255 |
| Net Debt | 66,275 | 72,943 | 73,918 | 78,451 | 78,846 |
| Gross Leverage | 3.5x | 3.4x | 3.0x | 2.9x | 2.7x |
| Net Leverage | 0.0x | 3.0x | 2.7x | 2.6x | 2.4x |
| Interest Coverage | 9.0x | 7.2x | 8.0x | 8.3x | 8.7x |
| FCF as % of Debt | 14.1% | 13.7% | 13.2% | 19.2% | 23.0% |
CreditSight View Comment
AS OF 14 May 2025We expect TMUS will once again lead the Big 3 in major KPIs in 2025, including ~5% EBITDA growth. We view earnings/growth visibility as higher than peers, with the outlook supported by its leading 5G mid-band coverage (over 300 million PoPs with ~200 MHz) and historical under-penetration in rural and enterprise markets. T-Mobile also boasts the lowest leverage (~2.3x) and strongest FCF/debt ratio amongst the Wireless Big 3, while its rising FCF generation and comparatively low dividend commitment provide flexibility for selective M&A. Despite the rising focus on convergence, we believe TMUS will stick with its off-balance sheet strategy for FTTH JVs and view the risk of a transformational broadband acquisition (ILEC or cable) as extremely low.
Recommendation Reviewed: May 14, 2025
Recommendation Changed: March 18, 2021
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Search topics about wealth insights and investments.Netflix Inc.
- Sector: Media
- Sub Sector: Technology
- Region: US
- Bond: NFLX 4.875 30
- Indicative Yield-to-Maturity (YTM): 4.639%
- Credit Rating : A3/A/-
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Fundamental View
AS OF 18 Mar 2025- Netflix is one of the few clear winners in the industry’s transition to streaming, and we believe the group’s leading position will be bolstered in 2025 as legacy media companies continue to rein in spending and international ambitions.
- From a financial perspective, we expect Netflix will deliver 20+% EBITDA growth in 2025 driven by a mix of subscriber growth, price hikes and margin expansion.
- Netflix’s financial policy is relatively conservative. While the company no longer targets $10-15 billion of gross debt, we view Netflix’s new financial policy as an evolution rather than a revolution and expect credit metrics to remain best in class.
Business Description
AS OF 18 Mar 2025- NFLX is the world's leading subscription streaming entertainment service with ~302 mn paid streaming subs in 190+ countries around the world. NFLX's programming includes original & acquired TV series, documentaries and feature films.
- NFLX began expanding internationally with the launch of services in Canada (Sep 2010), followed by LatAm (Sep 2011), and the UK and Ireland (Jan 2012). NFLX launched services in 17 more markets at a measured pace through the end of 2015 before launching in the rest of the world in Jan 2016 (ex-China, N Korea, Syria, Crimea).
- As of FY24, Netflix's regional subscriber breakdown was as follows: (1) EMEA - 101.1 mn; (2) UCAN - 89.6 mn; (3) APAC - 57.5 mn and (4) LATAM - 53.3 mn.
- Ted Sarandos and Greg Peters are Co-CEOs, with Mr. Sarandos appointed to the position in July 2020 and Mr. Peters in January 2023. Co-founder Reed Hastings was appointed as executive chairman of the Board in January 2023.
Risk & Catalysts
AS OF 18 Mar 2025- Market Saturation: Netflix is highly penetrated in the US market, so future growth will become increasingly dependent on price increases, uptake of the ad tier and success on the password sharing crackdown. The recent WWE and NFL deals also opens the door to higher-priced sports programming.
- Increased Competition: Several large competitors including Amazon and Apple are increasingly leaning into DTC video offerings on a global basis. Heightened competition may result in rising churn & declining gross additions for NFLX.
- M&A Risk: Netflix is in the early stages of an expansion into video games and has already acquired several studios. Additionally, several legacy media companies are weakly positioned and are actively considering asset sales. We believe Netflix has no interest in linear TV assets, but could be open to a studio purchase under the right circumstances.
Key Metric
AS OF 18 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 24,996 | 29,698 | 31,616 | 33,723 | 39,001 |
| Revenue YoY % | 24.0% | 18.8% | 6.5% | 6.7% | 15.6% |
| EBITDA | 5,116 | 6,806 | 6,695 | 7,650 | 11,019 |
| EBITDA Growth | 64% | 33% | (2%) | 14% | 44% |
| Cash Content Expense | 12,537 | 17,469 | 16,660 | 13,140 | 17,003 |
| CFO - CapEx | 1,929 | (132) | 1,619 | 6,926 | 6,922 |
| Dividends/CFO-Capex | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| LTM CFO-CapEx to Debt | 11.8% | (0.9%) | 11.3% | 47.6% | 44.4% |
CreditSight View Comment
AS OF 18 Apr 2025We believe Netflix’s premium valuation is justified given the group’s leading scale, operating momentum and credit metrics, which stand in stark contrast to the pressures facing legacy media peers. Netflix is one of the few clear winners in the industry’s transition to streaming, and we believe the group is on track to extend its leading position during a period of rising macro uncertainty since its legacy media competition is much more exposed to advertising market pressures. The company’s gross leverage is already best in class at ~1.3x, and we expect Netflix can generate ~$8+ billion of FCF in FY25 with a FCF to debt ratio in the ~60% area. Netflix is also positioned to maintain its double-digit top line and profit growth in 2025.
Recommendation Reviewed: April 18, 2025
Recommendation Changed: October 20, 2022
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Search topics about wealth insights and investments.Sumitomo Mitsui Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 18 Mar 2025After reorganising and building up capital for the full impact of Basel III, SMFG has in the past few years been acquisitive to build its next phase of growth, and now has a lower capital buffer than Mizuho.
In FY23, SMFG showed the best improvement in net interest income and fee income, but also had a number of one-offs in its results – insurance payouts for SMBCAC planes stuck in Russia offset by losses on the sale of its railcar leasing fleet in the US, as well as an impairment of its goodwill in FE Credit – that on the whole reduced net income. 9M24 results has showed improvements.
Given its size and systemic importance, SMFG is considered too big to fail, and will be supported by the Japanese government if needed.
Business Description
AS OF 18 Mar 2025- The core unit of SMFG is Sumitomo-Mitsui Banking Corp (SMBC), whose main predecessors were Sumitomo Bank and Mitsui Bank.
- SMFG does not have a large trust business as Sumitomo Trust and Chuo Mitsui Trust chose not to join SMFG, but merged with each other to form the separate Sumitomo Mitsui Trust Holdings.
- SMFG's group companies include the securities firm SMBC Nikko, SMBC Trust Bank, SMBC Card Company, SMBC Consumer Finance, Sumitomo Mitsui Finance and Leasing, SMFG India Credit Company (SMICC), Sumitomo Mitsui DS Asset Management, and SMBC Aviation Capital.
- It has been acquisitive over the years, particularly in emerging Asia and leasing assets. In 2021, the group took a 49% stake in Vietnam's FE Credit, 74.9% of Indian NBFI Fullerton Capital (now called SMICC), 4.99% of Philippines' RCBC, and 4.5% of US investment bank Jefferies. In 2022, it increased its stake in RCBC to 20%. In 2023, it acquired a 15% stake in Vietnam's VP Bank, and announced its intention to increase its stake in Jefferies from 4.5% to 15%, and in 2024 took its stake in SMICC to 100%.
Risk & Catalysts
AS OF 18 Mar 2025Similar to the other megabanks, SMFG aims to focus more on the US, and reduce low return RWAs in Europe and Asia ex-Japan.
Credit costs have seen some volatility. In FY23 bank level credit costs were good but worse at the card and personal unsecured loans units. 9M24 credit costs were up 17% YoY, mostly related to overseas banking subsidiaries. It has the lowest NPL ratio amongst the megabanks.
SMFG has taken stakes in FE Credit (49%) and VP Bank (15%) in Vietnam, Fullerton in India (100%, now renamed SMICC or SMFG India Credit Co) and RCBC in the Philippines (20%), to increase its exposure to emerging growth areas. It supported SMBC Aviation in its acquisition of Goshawk, and is increasing its 4.5% stake in Jefferies to 15%. However, FE Credit faced losses in 2022 and 2023 as a result of the Vietnam slowdown in 2022, highlighting the risks associated with EM personal unsecured lending.
Key Metric
AS OF 18 Mar 2025| JPY bn | FY21 | FY22 | FY23 | 3Q23 | 3Q24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.64% | 0.68% | 0.70% | 0.68% | 0.78% |
| Operating Income/Average Assets | 1.23% | 1.26% | 1.47% | 1.38% | 1.47% |
| Operating Expense/Operating Income | 62% | 61% | 57% | 60% | 56% |
| Pre-Impairment Operating Profit / Average Assets | 0.48% | 0.51% | 0.58% | 0.61% | 0.68% |
| Impairment charge/Average Loans | (0.31%) | (0.22%) | (0.27%) | (0.18%) | (0.19%) |
| ROAA | 0.30% | 0.32% | 0.36% | 0.40% | 0.53% |
| ROAE | 5.9% | 6.5% | 7.0% | 8.0% | 10.2% |
CreditSight View Comment
AS OF 16 May 2025SMFG’s banking business had performed well, while its non-bank subsidiaries had underperformed over FY21-22. The group had a better 2H vs a poor 1H23, with improved trading and fee revenues, partially offset by higher credit costs at the non-bank businesses. The group became acquisitive from 2021, taking a 49% stake in a leading Vietnamese NBFI and 15% of its parent (VP Bank), 20% of RCBC of the Philippines, 74.9% of NBFI Fullerton India (now 100%), 4.5% in US IB Jefferies (increasing to 15%), and 20% of India’s Yes Bank for the next stage of growth. Its high CET1 ratio has been whittled down by acquisitions. FY24 results were boosted by share sales and structured investment trusts. Govt. support is assured. We see 20 bp of upside from current levels.
Recommendation Reviewed: May 16, 2025
Recommendation Changed: January 27, 2025
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Search topics about wealth insights and investments.Mitsubishi UFJ Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 18 Mar 2025MUFG is the largest of Japan’s three megabanks, and has the most diversified operations by business line and geography. It has also been the most acquisitive until recently.
Core profitability had been weak due to Japan’s ultra-low interest rates and growth; that improved post an efficiency drive and a CEO change in April 2020; the bank has the best international margin and benefits from rising domestic interest rates.
Given its size and systemic importance, MUFG is considered too big to fail, and will be supported by the Japanese government if needed.
Business Description
AS OF 18 Mar 2025- The 2 main banks of MUFG are MUFG Bank (earlier the Bank of Tokyo-Mitsubishi UFJ or BTMU) & Mitsubishi UFJ Trust & Banking. In the early stages of Japan's long banking crisis, Bank of Tokyo merged with Mitsubishi Bank, and in the late stages they absorbed UFJ (former Sanwa Bank & Tokai Bank) while Mitsubishi Trust absorbed Toyo Trust & Nippon Trust.
- The group includes consumer lenders Mitsubishi-UFJ NICOS & ACOM, and securities/IB joint ventures with Morgan Stanley. MUFG invested in Morgan Stanley in 2008 and now has a ~20% stake. In Dec-22, it completed the sale of its US retail and commercial bank, MUFG Union Bank, to US Bancorp.
- It has a majority stake in Thailand's Bank of Ayudhya (now Krungsri), 20% stakes in Vietnam's Vietinbank and Philippines' Security Bank, and 100% of Indonesia's Bank Danamon.
- In August 2019, it acquired Colonial First State from Commonwealth Bank of Australia to strengthen its global asset management business, in 2020 it invested $700 mn in SE Asia's Grab, and more recently has bought Home Credit's Philippine and Indonesian subsidiaries, Link (an Australian pension fund administrator), auto loan companies in Indonesia, Albacore Capital, StanChart's Indonesian retail operations, and an Indian NBFI.
Risk & Catalysts
AS OF 18 Mar 2025Its recent divisional performance has been strong, with the domestic businesses benefiting from higher JGB yields.
Total credit costs are running at JPY 251 bn in 9M24, of which JPY 203 bn is from overseas operations. As MUFG has budgeted for JPY 400 bn of credit costs this year, there could be some serious kitchen sinking in the coming quarter.
The group’s cost-income ratio was previously in the high 60’s a few years ago, but improved efficiency, the sale of MUFG Union Bank in the US, and better revenues has led to this ratio falling to 61% in FY23 and 58% in 9M24; the group targets a 60% cost-income ratio.
MUFG is exposed to Japanese equities through large unrealised gains, but has steadily been decreasing its shareholdings every year. It reduced the MTM impact of rising yields on its $ bond portfolio, as well as the potential impact on its JGB portfolio given the modifications to yield curve controls.
Key Metric
AS OF 18 Mar 2025| JPY bn | FY21 | FY22 | FY23 | 3Q23 | 3Q24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.57% | 0.79% | 0.64% | 0.63% | 0.73% |
| Operating Income/Average Assets | 1.11% | 1.22% | 1.12% | 1.27% | 1.39% |
| Operating Expense/Operating Income | 69% | 65% | 67% | 58% | 58% |
| Pre-Impairment Operating Profit / Average Assets | 0.34% | 0.43% | 0.48% | 0.50% | 0.60% |
| Impairment charge/Average Loans | (0.30%) | (0.61%) | (0.44%) | (0.31%) | (0.28%) |
| ROAA | 0.32% | 0.30% | 0.39% | 0.45% | 0.59% |
| ROAE | 6.7% | 6.5% | 8.1% | 9.6% | 11.7% |
| CET1 Ratio excluding unrealised securities gains in AOCI | 9.5% | 9.8% | 11.8% | n/a | n/a |
CreditSight View Comment
AS OF 16 May 2025MUFG is the largest of the megabanks with more diversified business lines. Digitalisation and operational efficiency improvements, in addition to higher rates in Japan and the US, has led to much better results in FY24. Lending discipline has lifted international margins, which are now well higher than the other two. Its ~20% shareholding in Morgan Stanley has been a boon. Acquisitions have become more targeted. Its $ liquidity is also the best amongst its peers, and government support is assured. Accelerated sales of its shareholdings accompanied by buybacks may pressure its CET1 ratio buffer, which is in line with its peers at ~230 bp. We see 20 bp of upside from current levels for its TLAC senior paper.
Recommendation Reviewed: May 16, 2025
Recommendation Changed: January 27, 2025