China and US Equity Analyst

Roger Xie

Thematic (Sector/Industry)

<ul>
<li>Hong Kong de facto central bank, HKMA (Hong Kong Monetary Authority), issued a strategic paper exploring the feasibility of issuing a retail-focused CBDC (central bank digital currency), an e-HKD, within 12 months. One of the major use cases of e-HKD is to link with e-CNY and facilitate cross-border payment or transfer. This has underscored China's ambition to take further step rolling out its most advanced digital currency among major economies.</li>
<li>Based on the latest quarterly statistics on mobile app usage, digital currency app has become a dominant factor in user engagement. Stock trading and crypto trading apps show much higher daily user visits and viewing time, compared with other financial management apps. The proliferation of CBDC (central bank digital currency), such as e-HKD and e-CNY, will likely accelerate user growth and engagement. The major crypto exchange <a href="https://www.smartkarma.com/entities/coinbase-global-inc" target="_blank" data-smartkarma-citation="entities:32227:1" rel="noopener">Coinbase (COIN US)</a> has shown its registered users jumping 65% year-over-year in 21Q1 during the wider acceptancy of bitcoin. </li>
<li>We expect the majority of Hong Kong-based retail banks will likely roll out their own mobile apps with capability to transact on e-HKD and e-CNY in near term. The successful integration of this feature might likely impact user engagement, which might become a key KPI for banks' mobile app in our view. MAU/DAU (Month/Daily Active User) might become the differentiators for Hong Kong based retail banks such as  <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> , <a href="https://www.smartkarma.com/entities/hang-seng-bank-ltd" target="_blank" data-smartkarma-citation="entities:24:1" rel="noopener">Hang Seng Bank (11 HK)</a> , <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a> , <a href="https://www.smartkarma.com/entities/boc-hong-kong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:343:1" rel="noopener">BOC Hong Kong (BOC HK) (2388 HK)</a> , <a href="https://www.smartkarma.com/entities/dah-sing-financial-holdings" target="_blank" data-smartkarma-citation="entities:589:1" rel="noopener">Dah Sing Financial (440 HK). </a>
</li>
</ul>


Hong Kong de facto central bank, HKMA (Hong Kong Monetary Authority), issued a strategic paper exploring the feasibility of issuing a retail-focused CBDC (central bank digital currency), an e-HKD, within 12 months. One of the major use cases of e-HKD is to link with e-CNY and facilitate cross-border payment or transfer. This has underscored China's ambition to take further step rolling out its most advanced digital currency among major economies.
Based on the latest quarterly statistics on mobile app usage, digital currency app has become a dominant factor in user engagement. Stock trading and crypto trading apps show much higher daily user visits and viewing time, compared with other financial management apps. The proliferation of CBDC (central bank digital currency), such as e-HKD and e-CNY, will likely accelerate user growth and engagement. The major crypto exchange Coinbase (COIN US) has shown its registered users jumping 65% year-over-year in 21Q1 during the wider acceptancy of bitcoin. 
We expect the majority of Hong Kong-based retail banks will likely roll out their own mobile apps with capability to transact on e-HKD and e-CNY in near term. The successful integration of this feature might likely impact user engagement, which might become a key KPI for banks' mobile app in our view. MAU/DAU (Month/Daily Active User) might become the differentiators for Hong Kong based retail banks such as  HSBC Holdings (5 HK) , Hang Seng Bank (11 HK) , Bank of East Asia (23 HK) , BOC Hong Kong (BOC HK) (2388 HK) , Dah Sing Financial (440 HK). 



Hong Kong to Embrace Digital Currency E-HKD, Boosting Fintech Investment and Connectivity With E-CNY

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

Moody’s downgraded HSBC Holdings’ senior bond ratings to A3 from A2. They also downgraded the Baseline Credit Assessment (BCA) to a3 from a2, subordinated debt rating to Baa1 from A3, the non-cumulative preferred stock rating of Perps issued by HSBC Capital Funding (Dollar 1) L.P. and guaranteed by HSBCH to Baa3(hyb) from Baa2(hyb). Meanwhile they affirmed the Baa3(hyb) preferred stock non-cumulative rating of HSBCH’s ‘high-trigger’ Additional Tier 1 (AT1) notes.

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.

Equity Bottom-Up

Of Australia’s largest banks, there are few that reveal improving core net interest income. Macquarie is unique in this respect and further enters the current period of inflation, recovery with far higher assets.

Of Australia’s largest banks, there are few that reveal improving core net interest income. Macquarie is unique in this respect and further enters the current period of inflation, recovery with far higher assets. 

Macquarie – Don’t You Forget About Me

Several large global banks saw bad loans rise a reasonable amount during last and then fall during the first quarter this year. The experience at HSBC is worse, and directionally at odds at present. It does not feel like the quintessential recovery bank in FY21, and where DBS glows in comparison.

Several large global banks saw bad loans rise a reasonable amount during last and then fall during the first quarter this year. The experience at HSBC is worse, and directionally at odds at present. It does not feel like the quintessential recovery bank in FY21, and where DBS glows in comparison. 

HSBC – Underwhelms Against DBS, Global Peers

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

*Recent USA Branch Disposal: As announced on February 22, 2021, HSBC Holdings plc (5.HK/HSBA.LN) [HSBC]  announced that is set to withdraw from U.S. retail banking, seeking to dispose of a business that has long underperformed. On May 26, 2021 HSBC and Cathay General Bancorp (CATY.US) [Cathay] in Los Angeles announced that Cathay will acquire 10 retail branches in California from HSBC. Cathay also acquired USD 0.8 bn in loans - residential mortgage, retail business banking, and personal loans, along with USD 1.0 bn in deposits;  and*HSBCNA Still A Chronic Headache: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. HSBCNA’s operating costs exceed recurring revenues. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis.

*Recent USA Branch Disposal: As announced on February 22, 2021, HSBC Holdings plc (5.HK/HSBA.LN) [HSBC]  announced that is set to withdraw from U.S. retail banking, seeking to dispose of a business that has long underperformed. On May 26, 2021 HSBC and Cathay General Bancorp (CATY.US) [Cathay] in Los Angeles announced that Cathay will acquire 10 retail branches in California from HSBC. Cathay also acquired USD 0.8 bn in loans - residential mortgage, retail business banking, and personal loans, along with USD 1.0 bn in deposits;  and*HSBCNA Still A Chronic Headache: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. HSBCNA’s operating costs exceed recurring revenues. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis.

United Kingdom

HSBC Holdings plc is the holding company for the HSBC Group. The Company provides a variety of international banking and financial services, including retail and corporate banking, trade, trusteeship, securities, custody, capital markets, treasury, private and investment banking, and insurance.  The Group operates worldwide.

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HSBC Holdings (5 HK)

Hong Kong to Embrace Digital Currency E-HKD, Boosting Fintech Investment and Connectivity With E-CNY

Hong Kong Monetary Authority issued a strategic paper exploring the feasibility of issuing e-HKD within 12 months. Banking app MAU/DAU might become...

Roger Xie

HSBC Senior Debt Downgraded To A3

Moody’s downgraded HSBC Holdings’ senior bond ratings to A3 from A2. They also downgraded the Baseline Credit Assessment (BCA) to a3 from a2,...

BondEvalue

Macquarie – Don’t You Forget About Me

There are few banks that reveal improving core net interest income. Macquarie is unique in this respect and further enters the current period of...

Daniel Tabbush

HSBC – Underwhelms Against DBS, Global Peers

Several large global banks saw bad loans rise a reasonable amount during last and then fall during the first quarter this year. The experience at...

Daniel Tabbush

HSBC Holdings Plc – And So It Begins

HSBC HOLDINGS: HSBC is withdrawing from U.S. retail banking, and recently announced that it will sell 10 branches to Cathay General Bancorp in Los...

Thomas J. Monaco

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