Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

<ul>
<li>Daewoo Shipping &amp; Marine Engineering early in May 2023 agreed to takeover by Hanwah Group</li>
<li>Hanwah Ocean, the re-named entity, reported financial stress for years, a lumpy NPL for banks</li>
<li>C&amp;P CIQ data suggests that all four major Korean banks are creditors to Hanwah Ocean</li>
</ul>


Daewoo Shipping &amp; Marine Engineering early in May 2023 agreed to takeover by Hanwah Group
Hanwah Ocean, the re-named entity, reported financial stress for years, a lumpy NPL for banks
C&amp;P CIQ data suggests that all four major Korean banks are creditors to Hanwah Ocean


Korea's Large Banks & Hanwah Ocean - Credit Reversals or Overhang?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.</li>
<li>The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.</li>
<li>The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).</li>
</ul>


We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.
The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.
The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).


Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

Event-Driven

<ul>
<li>The new head of Woori Financial Group (316140 KS) Chairman Lim Jong-Ryong recently revealed his willingness to acquire a major/mid-scale securities company.</li>
<li>Among these potential acquisition candidates, Samsung Securities is considered to be the most likely securities companies that could be purchased by Woori Financial Group.</li>
<li>In the long term (next 2-3 years), there is a good probability that Woori Financial Group could acquire Samsung Securities, which is not a core business of the Samsung Group.</li>
</ul>


The new head of Woori Financial Group (316140 KS) Chairman Lim Jong-Ryong recently revealed his willingness to acquire a major/mid-scale securities company.
Among these potential acquisition candidates, Samsung Securities is considered to be the most likely securities companies that could be purchased by Woori Financial Group.
In the long term (next 2-3 years), there is a good probability that Woori Financial Group could acquire Samsung Securities, which is not a core business of the Samsung Group.


Will Woori Financial Group Acquire Samsung Securities?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> replaces <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> at the close on 31 March.</li>
<li>We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> at the close of trading on 31 March.</li>
<li>
<a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.</li>
</ul>


As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.

DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.


KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

<ul>
<li>On Friday 10 March, Svb Financial (SIVB US) suddenly collapsed, becoming the largest bank to fail in the United States since the 2008 financial crisis.</li>
<li>In our view, the collapse of SVB Financial will likely have a negative near-term impact on the Korean banks. </li>
<li>Three ways that this will negatively impact Korean banks include risk-off investment sentiment, greater excuse to hold on to cash by Korean banks, and lower interest rate spreads. </li>
</ul>


On Friday 10 March, Svb Financial (SIVB US) suddenly collapsed, becoming the largest bank to fail in the United States since the 2008 financial crisis.
In our view, the collapse of SVB Financial will likely have a negative near-term impact on the Korean banks. 
Three ways that this will negatively impact Korean banks include risk-off investment sentiment, greater excuse to hold on to cash by Korean banks, and lower interest rate spreads. 


Collapse of Silicon Valley Bank (SVB) - Impact on Korean Banks

South Korea

Woori Financial Group Inc. provides commercial banking services. The Company offers deposit services, loan services, bill services, settlement services, credit card, international, online banking, and other related services. Woori Financial Group also operates banking and retail banking businesses.

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Woori Financial Group (316140 KS)

Korea's Large Banks & Hanwah Ocean - Credit Reversals or Overhang?

Hanwah Ocean recapitalization may suggest NPL benefits for Korea's largest banks, but other deterioration can overshadow this one single exposure....

Daniel Tabbush

Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising...

Douglas Kim

Will Woori Financial Group Acquire Samsung Securities?

In the long term (next 2-3 years), there is a good probability that Woori Financial Group could acquire Samsung Securities, which is not a core...

Douglas Kim

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

DGB Financial will be added to the KOSPI200 Index on 31 March. The stock trades cheaper than its peers but becomes short sell eligible from the...

Brian Freitas

Collapse of Silicon Valley Bank (SVB) - Impact on Korean Banks

The collapse of SVB Financial will negatively impact Korean banks due to risk-off investment sentiment, greater excuse to hold on to cash by Korean...

Douglas Kim

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