Avior Financials | Discovery | Capitec fees | Fintech investment trends | Peregrine

In this week's Avior Financials note we discuss:

Discovery's H1 '19 results which continue the theme of investment for future growth. We think investors' concerns over cash flows and Discovery's Vitality model are overdone.

Santam's trading statement for FY'18 HEPS was ahead of our expectations. However, we believe SNT's valuation is extrapolating a high earnings base and find the current forward P/E at 17.9x too demanding.

Discovery Bank is set to launch to the public (probably with a waiting list initially) in Mar '19. While Discovery's H1 '19 results did not show any financials for Discovery Bank, the BA 900 data shows that Discovery Bank probably has enough capital to grow in card and unsecured credit products.

While FirstRand's trading statement only disclosed IFRS earnings guidance, the implied operational growth is disappointing.

Capitec announced its FY '20 transactional banking fees this week. Capitec cut the monthly account fee from R5.80 to R5 – the first monthly fee cut since the start of our data series in 2010 (when the monthly fee was R4.50).

Bloomberg report that Daniel Mminele (SARB deputy governor) is on the short list to take up the CEO position at ABSA. In our view, Mr Mminele would be a strong candidate for the role.

The H2 '18 KPMG Pulse of Fintech report shows that 2018 was a significant year for global fintech M&A (consolidation is accelerating) and investment.

Peregrine Holdings is our top pick in the Specialty Finance sector. We value Citadel (PGR's SA high net worth wealth management operations) at c.R17/share.

The JSE Ltd's trading statistics (to 15 Feb ‘19) show 34.2% YoY decline in cash equity value traded YTD.