Notes from the mall - positive trends persist

Having visited a number of stores over the past week, we remain confident that the good trends observed over Holiday have persisted through Q1. Inventory levels and promotion remain very controlled across the vast majority of retailers, and even traffic looks decent enough. Across all retailers we visited, we observed more positives than we have done in the last couple of years. Heading into the Q1 earnings, we have seen some recent stock underperformance, but we believe results will be solid enough to restore confidence in the better trends this year.

Strong acceleration towards end of October

Model update

This report contains forecasts updated for reported Q218 results. Neither our financial nor PSU estimates are materially changed and we remain Overweight with a 12m PT of $365.

V/MA: strong core, adjacencies more competitive

V/MA remain core long term holdings with secular cash to card tailwinds driving strong growth long term, supported by developments such as contactless. Valuation remains reasonable, although newer growth areas such as B2B face greater competition. We remain Overweight V/MA, raise our price targets to $173 and $250 respectively and currently favour V which trades on a PE of 28x, three turns lower than MA.

Banks: Trading update and 3Q18 preview

Market volatility has moderated significantly since the beginning of the year, ceasing to be a tailwind for the banks' trading revenues in 3Q18. Despite the strong IB pipelines (announced M&A is up 40% YTD), fee pools have been affected by timing issues and are down 15-20% across the industry for the current quarter. Medium term, the outlook remains positive thanks to improving GDP growth, benign credit conditions, rising interest rates and a deregulatory focus. We have lowered our 3Q18 EPS estimates by 3% on average. Our longer term forecasts decline only modestly by 1%. C remains our t...