Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Negative Jaws &amp; Operating Losses: Bangkok Bank (BBL.TB) [BBL] reported 4Q20 results of THB 2.4 bn, declining THB 1.6 bn (40.3%) on a linked quarter basis. Core operating results were even worse, coming in at a negative THB 2.4 bn and declining THB 3.8 bn (2.7x) on a linked quarter basis. Results were poor across the board with negative operating jaws and poor credit being the quarter’s themes; and *Credit Still Heading In Wrong Direction: We find that BBL’s annualized net new NPLs during the period remained at an accelerated level of 22.5%. Given the elevated increase in net new NPLs, that moratorium credits are unknown and remain a wild card, and that COVID-19 continues to wreak havoc, we find that loss reserves are short by nearly THB 50.0 bn or just under two years of 4Q20 PBT.

*Negative Jaws &amp; Operating Losses: Bangkok Bank (BBL.TB) [BBL] reported 4Q20 results of THB 2.4 bn, declining THB 1.6 bn (40.3%) on a linked quarter basis. Core operating results were even worse, coming in at a negative THB 2.4 bn and declining THB 3.8 bn (2.7x) on a linked quarter basis. Results were poor across the board with negative operating jaws and poor credit being the quarter’s themes; and *Credit Still Heading In Wrong Direction: We find that BBL’s annualized net new NPLs during the period remained at an accelerated level of 22.5%. Given the elevated increase in net new NPLs, that moratorium credits are unknown and remain a wild card, and that COVID-19 continues to wreak havoc, we find that loss reserves are short by nearly THB 50.0 bn or just under two years of 4Q20 PBT.

*Low Quality Beat: Siam Commercial Bank (SCB.TB) [SCB] reported an unimpressive 4Q20 result of THB 4.6 bn – up just THB 54 mn (1.2%) linked quarter. Were it not for strong linked quarter fee and commission growth of THB 2.8 bn (33.3%) which was primarily driven by the recognition of performance-linked compensation on bancassurance and wealth management bonus, 4Q20 results would have been an unmitigated disaster at SCB; and 
*Poor Credit and Consistently Higher Provisions To Persist: Credit trends at SCB are in complete contravention to Kasikornbank (KBANK.TB), as provisions actually increased THB 1.3 bn (9.9%) on weakened credit.SCB’s annualized net new NPLs during the period remained at an accelerated level of 63.2%. By our calculation, we find that SCB’s loss reserves are light in the neighborhood of THB 28 bn or 18 months of bottom-line results.

*Low Quality Beat: Siam Commercial Bank (SCB.TB) [SCB] reported an unimpressive 4Q20 result of THB 4.6 bn – up just THB 54 mn (1.2%) linked quarter. Were it not for strong linked quarter fee and commission growth of THB 2.8 bn (33.3%) which was primarily driven by the recognition of performance-linked compensation on bancassurance and wealth management bonus, 4Q20 results would have been an unmitigated disaster at SCB; and 
*Poor Credit and Consistently Higher Provisions To Persist: Credit trends at SCB are in complete contravention to Kasikornbank (KBANK.TB), as provisions actually increased THB 1.3 bn (9.9%) on weakened credit.SCB’s annualized net new NPLs during the period remained at an accelerated level of 63.2%. By our calculation, we find that SCB’s loss reserves are light in the neighborhood of THB 28 bn or 18 months of bottom-line results.

Siam Commercial Bank – B'assurance Masks Troubles

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given.

*Big Quarter: Kasikornbank (KBANK.TB) (KBank) reported an impressive 4Q20 result of  THB 13.3 bn, increasing THB 6.7 bn (98.5%) linked quarter. Excluding gains, core operating results still improved THB 3.7 bn or 63.8% linked quarter to THB 9.5 bn. The sole driver to this stellar bottom-line performance at KBank was a massive THB 10.1 bn (93.8%) reduction in its loan loss provision – better than 3Q20 guidance;   *Credit Improvement, But KBank Hyper Aggressive On Lower Provisions: The real story for KBank is that its loans under moratorium declined from THB 71.0 bn (40% of outstandings) to THB 46.3 bn (19% of outstandings) on a linked quarter basis. With recoveries of THB 3.4 bn during 4Q20, we find that KBank’s net new NPLs during the period substantially decelerated from 22.3% at 2Q20 to 3.5%. By our calculation, we find that reserve cover remains short by close to THB 13.0 bn (about one quarter of bottom-line performance) – suggesting that the current provision reduction came a quarter too early; and*Negative Operating Jaws: KBank actually posted negative operating jaws during the quarter with linked quarter operating revenues declining THB 532 mn (1.5%) and operating expenses increasing THB 3.8 bn (23.2%) - the C/I ratio 11.5% higher to 57.3%.  Management intends to manage expenses better going forward, but no specifics have as yet been given. 

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.

The Thai credit card company, <a href="https://www.smartkarma.com/entities/krungthai-card-pcl" target="_blank" data-smartkarma-citation="entities:20097:1" rel="noopener">Krungthai Card (KTC TB)</a> has been a favorite for some time. This was due to margins, returns, cost containment, managing credit risk and stability of recoveries. None of this has really changed, although profit growth is now uncharacteristically negative. What has though changed is the apparent value, where shares are on current PB of 9.5x and 49x current annualized earnings.

The Thai credit card company, Krungthai Card (KTC TB) has been a favorite for some time. This was due to margins, returns, cost containment, managing credit risk and stability of recoveries. None of this has really changed, although profit growth is now uncharacteristically negative. What has though changed is the apparent value, where shares are on current PB of 9.5x and 49x current annualized earnings. 

*Stress Continues: A competitor hosted a conference call with the management of Kasikornbank PCL (KBANK-R.TB) [KBANK] which suggests nothing positive is occurring. Credit risk remains elevated, yet half of current and projected loan growth will be used for current customer relief measures; and
*Weak Guidance: KBANK also reiterated guidance, although we weren’t left with a high degree of confidence that KBANK wouldn’t fall short in 2021.Coupled with the aforementioned credit challenges, we anticipate the roll forward of lower lending rates to continue to impact NIMs, as will the rising loan default rates.

*Stress Continues: A competitor hosted a conference call with the management of Kasikornbank PCL (KBANK-R.TB) [KBANK] which suggests nothing positive is occurring. Credit risk remains elevated, yet half of current and projected loan growth will be used for current customer relief measures; and
*Weak Guidance: KBANK also reiterated guidance, although we weren’t left with a high degree of confidence that KBANK wouldn’t fall short in 2021.Coupled with the aforementioned credit challenges, we anticipate the roll forward of lower lending rates to continue to impact NIMs, as will the rising loan default rates. 

Thailand

Krung Thai Bank Public Company Limited is a state-owned commercial bank offering various banking and financial services including commercial, consumer, credit card, and mortgage loans, as well as provident fund management, foreign exchange, and international trade financing services.  The Bank is majority owned by the Financial Institutions Development Fund.

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

Krung Thai Bank Pub (KTB TB)

Bangkok Bank – Going Backward

BANGKOK BANK: BBL reported weak 4Q20 results - declining 40.3% linked quarter. Results were poor across the board with negative operating jaws and...

Thomas J. Monaco

Siam Commercial Bank – B'assurance Masks Troubles

SIAM COMMERCIAL BANK: SCB reported an unimpressive 4Q20 result – up just 1.2% linked quarter. Were it not for strong bancassurance growth, 4Q20...

Thomas J. Monaco

Kasikornbank – Less Is More

KASIKORNBANK: KBank reported an impressive 4Q20 result - driven by a 93.8% reduction in provisions, as moratorium loans declined from 40% to 19%....

Thomas J. Monaco

KTC – Too Far Too Fast?

Fundamentals have changed dramatically at KTC, but value has, where shares are on current PB of 9.5x and 49x current annualized earnings.

Daniel Tabbush

Kasikornan – Unconvincing Call

KASIKORNBANK: KBANK 's credit risk remains elevated, yet half of current and projected loan growth will be used for current customer relief loans....

Thomas J. Monaco

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)