Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

Overall lending, in terms of loans outstanding, is now relatively static, even though YoY growth rates remain comparatively high at around +5.7%pa.  End-February 2021 loan outstandings have drifted back to June 2020 levels, that is to around to the time of the surge in new lending as Japan came out of its first COVID-induced nationwide lock-down.While the Japanese bank sector has enjoyed a rally since the beginning of the year on the back of a weakening Yen, the start of the roll-out of COVID-19 vaccines and a steepening of the long-bond yield curve (albeit from negative territory to closer to zero), the fundamental outlook for the banks remains clouded.  Technically, having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), we expect the sector to weaken on reducing volume as we approach the fiscal year-end in Japan.The first quarter of CY2021 has been a fun ride for holders of the more liquid Japanese bank stocks, but trees do not grow to Heaven and stock prices do not rise for ever  –  especially Japanese bank stocks.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/196/406/original/JBanks-2021-0323-TPXvsTPNBNK-2015-2021.jpg?1616476627" class="editor-image img-responsive" data-smartkarma-image-id="196406"></figure></section>

Overall lending, in terms of loans outstanding, is now relatively static, even though YoY growth rates remain comparatively high at around +5.7%pa.  End-February 2021 loan outstandings have drifted back to June 2020 levels, that is to around to the time of the surge in new lending as Japan came out of its first COVID-induced nationwide lock-down.While the Japanese bank sector has enjoyed a rally since the beginning of the year on the back of a weakening Yen, the start of the roll-out of COVID-19 vaccines and a steepening of the long-bond yield curve (albeit from negative territory to closer to zero), the fundamental outlook for the banks remains clouded.  Technically, having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), we expect the sector to weaken on reducing volume as we approach the fiscal year-end in Japan.The first quarter of CY2021 has been a fun ride for holders of the more liquid Japanese bank stocks, but trees do not grow to Heaven and stock prices do not rise for ever  –  especially Japanese bank stocks.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to hold above critical support levels and market dynamics remain largely positive. Until this changes, we believe global equities are headed higher in the coming weeks and months. Additionally, we are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to hold above critical support levels and market dynamics remain largely positive. Until this changes, we believe global equities are headed higher in the coming weeks and months. Additionally, we are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Global Equity Strategy: Small-Caps and Value Stocks Remain in Focus

Equity Bottom-Up

Mizuho Financial Group / Equity Bottom-Up

“It’s déjà vu all over again” -  Attributed to Yogi Berra (1925-2015), legendary baseball Hall of FamerGetting money from a banker is sometimes likened to trying to squeeze blood out of a stone. Customers of Mizuho Bank, the principal commercial banking subsidiary of megabank holding company <a href="https://www.smartkarma.com/entities/mizuho-financial-group-inc" target="_blank" data-smartkarma-citation="entities:219:1" rel="noopener">Mizuho Financial Group (8411 JP)</a> (MHFG), could be forgiven for agreeing with this derogatory epithet after over half of the bank’s 5,395 ATMs stopped working suddenly on Sunday 28 February.  Many customers were unable to draw cash out from the ATMs and some had their cash cards and savings passbooks ‘swallowed’ by the recalcitrant machines.  Internet banking was also apparently affected.This is not the first time that Mizuho has had major problems as a result of computer system crashes: there were similar issues in April 2002 and again in March 2011.  On both occasions, the Financial Services Agency (FSA) subsequently issued Business Correction Orders against the bank.  This time it appears that problems arose during a fixed deposit data update, causing the system to crash.Reputational damage is extremely difficult for any company to recover from easily, and perhaps more so for a bank where not only are issues of trust and public responsibility as a financial institution involved but also large sums of money.  What takes a generation to build can be lost in a moment when it comes to reputation and trust.  Smartkarma readers may well remember the public excoriation in 2010 on TV of a clutch of bank presidents both in the USA and the UK in the wake of the Global Financial Crisis. In Japan, where the megabanks emerged largely unscathed from the worst excesses of the GFC (although their investment portfolios took a severe hit in FY3/2009), incoming Mizuho Financial Group president &amp; CEO Yasuhiro Sato seemed to spend much of his first six months in office from June 2011 appearing on TV to repeatedly publicly apologize for Mizuho’s past systems errors and for the ongoing inconvenience to customers.Senior management clearly have much to do in the wake of this latest incident to restore Mizuho’s reputation among customers as a brand that is synonymous with reliability.Market reaction has been typically perverse, with Mizuho’s share price rising gently as part of the recovery from Friday’s Wall Street sell-off.  The stock is up close to +13% over the last 3 months (against an average +17% for peers) but is only +1.5% YoY (versus an average +2.5% for peers).  In short, the stock is underperforming even as the banking sector outperforms the Topix Index for the first time in several years.As we have said in past Smartkarma Insights, MHFG’s lack of consistency, either in profit generation or management execution, makes this a difficult stock to recommend on fundamentals.  This latest systems débâcle will not improve its already battered reputation for reliability.  MHFG has time and again promised much but then either failed to deliver or has surprised the market with sudden sweeping changes in strategy, requiring long time-horizons for implementation and creating value.Caveat Emptor! (May the Buyer Beware!) remains our advice to would-be investors in this enormous but highly volatile banking group.

“It’s déjà vu all over again” -  Attributed to Yogi Berra (1925-2015),  legendary baseball Hall of FamerGetting money from a banker is sometimes likened to trying to squeeze blood out of a stone. Customers of Mizuho Bank, the principal commercial banking subsidiary of megabank holding company Mizuho Financial Group (8411 JP) (MHFG), could be forgiven for agreeing with this derogatory epithet after over half of the bank’s 5,395 ATMs stopped working suddenly on Sunday 28 February.  Many customers were unable to draw cash out from the ATMs and some had their cash cards and savings passbooks ‘swallowed’ by the recalcitrant machines.  Internet banking was also apparently affected.This is not the first time that Mizuho has had major problems as a result of computer system crashes: there were similar issues in April 2002 and again in March 2011.  On both occasions, the Financial Services Agency (FSA) subsequently issued Business Correction Orders against the bank.  This time it appears that problems arose during a fixed deposit data update, causing the system to crash.Reputational damage is extremely difficult for any company to recover from easily, and perhaps more so for a bank where not only are issues of trust and public responsibility as a financial institution involved but also large sums of money.  What takes a generation to build can be lost in a moment when it comes to reputation and trust.  Smartkarma readers may well remember the public excoriation in 2010 on TV of a clutch of bank presidents both in the USA and the UK in the wake of the Global Financial Crisis. In Japan, where the megabanks emerged largely unscathed from the worst excesses of the GFC (although their investment portfolios took a severe hit in FY3/2009), incoming Mizuho Financial Group president &amp; CEO Yasuhiro Sato seemed to spend much of his first six months in office from June 2011 appearing on TV to repeatedly publicly apologize for Mizuho’s past systems errors and for the ongoing inconvenience to customers.Senior management clearly have much to do in the wake of this latest incident to restore Mizuho’s reputation among customers as a brand that is synonymous with reliability.Market reaction has been typically perverse, with Mizuho’s share price rising gently as part of the recovery from Friday’s Wall Street sell-off.  The stock is up close to +13% over the last 3 months (against an average +17% for peers) but is only +1.5% YoY (versus an average +2.5% for peers).  In short, the stock is underperforming even as the banking sector outperforms the Topix Index for the first time in several years.As we have said in past Smartkarma Insights, MHFG’s lack of consistency, either in profit generation or management execution, makes this a difficult stock to recommend on fundamentals.  This latest systems débâcle will not improve its already battered reputation for reliability.  MHFG has time and again promised much but then either failed to deliver or has surprised the market with sudden sweeping changes in strategy, requiring long time-horizons for implementation and creating value.Caveat Emptor! (May the Buyer Beware!) remains our advice to would-be investors in this enormous but highly volatile banking group.

Mizuho Financial Group (8411 JP):  Deja Vu All Over Again

Our bullish outlook remains intact and is supported by the absence of breakdowns across major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) and ongoing positive market dynamics. Until this changes, we believe global equities are headed higher in the coming weeks and months.

Our bullish outlook remains intact and is supported by the absence of breakdowns across major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) and ongoing positive market dynamics. Until this changes, we believe global equities are headed higher in the coming weeks and months.

Global Equity Strategy: Stick With Reflation & Reopening Theme

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Nissin Foods Holdings / Equity Capital Markets

Three shareholders of Nissin Foods plan to raise around US$226m via a global offering by selling 2.9% of the company. The selldown is being undertaken to reduce the cross shareholding.In this insight, we will run the deal through our ECM framework and provide our thoughts on the deal.

Three shareholders of Nissin Foods plan to raise around US$226m via a global offering by selling 2.9% of the company. The selldown is being undertaken to reduce the cross shareholding.In this insight, we will run the deal through our ECM framework and provide our thoughts on the deal.

Nissin Foods Placements - Shouldn't Have a Large Impact

Japan

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Mizuho Financial Group, Inc. provides comprehensive financial services through its subsidiaries. The Group provides variety of financial services such as general banking, securities brokerage, trust banking, and assets management.

Japan Post Bank Co. Ltd. provides general banking services. The Company offers deposits, savings, loans, currency exchange transactions, investment trusts, national bonds, and other related banking services to individuals and businesses. Japan Post Bank also provides other financial services such as insurance agency and financing service.

Shinkin Central Bank is a central bank for shinkin banks nationwide, operating as a cooperative financial institution.  The Bank has developed businesses in a variety of fields that contribute the shinkin banking industry.  The Bank's services include enhancement of the credit standing, efficient use of shikin bank's surplus funds, and settlement of domestic exchange transaction.

Resona Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides financial services, including banking, trust operations, and credit card services. Resona Holdings also offers consulting services related to personal loans, asset management, and asset succession.

Sumitomo Mitsui Trust Holdings, Inc. is a holding company established jointly by Chuo Mitsui Trust Holdings and Sumitomo Trust and Banking. As a financial group, the Bank provides trust banking business, as well as securities brokerage, assets management, and related financial services.

The Chiba Bank, Ltd. is a regional bank based in Chiba Prefecture. The Bank offers general banking services including deposits, loans, and foreign exchange transactions. The Chiba Bank also develops software and provides financial services such as leasing, securities brokerage, letter of credit, and credit cards.

Concordia Financial Group, Ltd. is a holding company established through the merger of Bank of Yokohama and Higashi-Nippon Bank. The Company provides banking services and other financial services.

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

National Australia Bank Limited is an international banking group which operates in Australia, New Zealand, Europe, Asia and the United States.  The Group offers banking services, credit and access card facilities, leasing, housing and general finance, international and investment banking, wealth and funds management, life insurance and custodian, trustee and nominee services.

DBS Group Holdings Limited and its subsidiaries provide a variety of financial services.  The Company offers services including mortgage financing, lease and hire purchase financing, nominee and trustee, funds management, corporate advisory and brokerage .  DBS Group also acts as the primary dealer in Singapore government securities.

United Overseas Bank Limited provides a wide range of financial services including personal financial services, wealth management, private banking, commercial and corporate banking, transaction banking, investment banking, corporate finance, capital market activities, treasury services, futures broking, asset management, venture capital management and insurance.

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

Kotak Mahindra Bank Limited is a full service commercial bank. The Bank offers a wide range of products and services such as personal, commercial, and corporate banking services, including deposit accounts, loans, and investments. Kotak Mahindra Bank serves customers in India.

State Bank of India provides a wide range of banking and financial services to corporate, institutional, commercial, agricultural, industrial and individual customers throughout India.  The Bank also provides international banking to its Indian customers and has operations in other countries.

PNC Financial Services Group, Inc. is a diversified financial services organization.  The Company provides regional banking, wholesale banking, and asset management services nationally and in the Company's primary regional markets.

Citigroup Inc. is a diversified financial services holding company that provides a broad range of financial services to consumer and corporate customers. The Company services include investment banking, retail brokerage, corporate banking, and cash management products and services. Citigroup serves customers globally.

PT Bank Central Asia Tbk provides banking and related services.  The Bank also provides custodianship, trusteeship, and management of pension funds of financial institutions.  Through its subsidiaries, the Bank also provides leasing and consumer financing services.

Westpac Banking Corporation offers general and savings banking services.  The Company provides investment portfolio management and advice, insurance services,  consumer finance, and money market services among other services.  Westpac Banking Corp. serves individuals, businesses, and corporations worldwide.

Sumitomo Mitsui Financial Group, Inc. manages financial operations for its subsidiaries. The Company provides commercial banking and a variety of financial services.

Sumitomo Mitsui Financial Group (8316 JP)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Sumitomo Mitsui Financial Group (8316 JP)

Japanese Bank Lending: A Lot of Static

The first quarter of CY2021 has been a fun ride for holders of the more liquid Japanese bank stocks, but trees do not grow to Heaven and stock...

J. Brian Waterhouse

Global Equity Strategy: Small-Caps and Value Stocks Remain in Focus

We are reiterating our overweight recommendations on small-caps and value as we believe outperformance from these areas is likely to continue.

Vermilion Research

Mizuho Financial Group (8411 JP): Deja Vu All Over Again

Getting money from a banker is sometimes likened to trying to squeeze blood out of a stone. Customers of Mizuho Bank experienced this first-hand...

J. Brian Waterhouse

Global Equity Strategy: Stick With Reflation & Reopening Theme

Our bullish outlook remains intact supported by the absence of breakdowns across major global indexes. Until this changes, we believe global...

Vermilion Research

Nissin Foods Placements - Shouldn't Have a Large Impact

Three shareholders of Nissin Foods plan to raise around US$226m via a global offering by selling 2.9% of the company. The selldown is being...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)