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>Granular data at Hang Seng Bank suggests a greater deterioration in both HK and China than is readily visible in headline numbers</li>
<li>The bank's China pre-tax profit is down 70% YoY in 1H24 and its total stage 3 loans are up 84% YoY in 1H24</li>
<li>The bank's credit-impaired loans for Hong Kong CRE rose from HKD1,081m to HKD13,485m, from 2H23 to 1H24</li>
</ul>


Granular data at Hang Seng Bank suggests a greater deterioration in both HK and China than is readily visible in headline numbers
The bank's China pre-tax profit is down 70% YoY in 1H24 and its total stage 3 loans are up 84% YoY in 1H24
The bank's credit-impaired loans for Hong Kong CRE rose from HKD1,081m to HKD13,485m, from 2H23 to 1H24


Hang Seng Bank - China Profit -70% YoY, Stage 3 Loans +84% YoY, HK CRE Impaired Loan +12.5x (Times)

<ul>
<li>With many real estate developers in China reporting losses, and with greater clarity of their woes, there should be flow through to banks. </li>
<li>Generally, at the top line and in head line bad loans, this is simply not visible, so that one must look to notes to financial statements, other granular data.</li>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a> shows restructured loans up from RMB41bn to RMB61bn in just six months, with many China banks showing far higher loss loans</li>
</ul>


With many real estate developers in China reporting losses, and with greater clarity of their woes, there should be flow through to banks. 
Generally, at the top line and in head line bad loans, this is simply not visible, so that one must look to notes to financial statements, other granular data.

Bank Of Communications Co H (3328 HK) shows restructured loans up from RMB41bn to RMB61bn in just six months, with many China banks showing far higher loss loans


China Banks - Losses at Developers, Notes to Financials at Some Banks, More Clear than Headlines

Equity Bottom-Up

Haitong Securities Co Ltd (A) / Equity Bottom-Up

<ul>
<li>With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons</li>
<li>The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs</li>
<li>Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs</li>
</ul>


With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons
The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs
Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs


Haitong Securities - Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of August 16th.</li>
<li>We estimate the weekly outflows to be US$600.9 million, led by materials, industrials, consumer discretionary, and offset by financials, communication services, health care.</li>
<li>Outflows were driven by Material, Industries and Consumer Discretionary sectors. We highlight flows for CATL (300750 CH).</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of August 16th.
We estimate the weekly outflows to be US$600.9 million, led by materials, industrials, consumer discretionary, and offset by financials, communication services, health care.
Outflows were driven by Material, Industries and Consumer Discretionary sectors. We highlight flows for CATL (300750 CH).


<ul>
<li>We analyse the changes of A-H premium on 144 stocks over the last week. The average A-H premium was 112.4% as of Aug 9th.</li>
<li>The average A-H premium changed by 1.5ppt week-on-week, led by consumer discretionary, information technology, energy and offset by utilities, health care.</li>
<li>We highlight weekly changes in A-H premium for Asymchem Lab, Shanghai Pharm, China Eastern, Air China, Smic, Hepalink, WuXi AppTec, Pharmaron, Hangzhou Tiger.</li>
</ul>


We analyse the changes of A-H premium on 144 stocks over the last week. The average A-H premium was 112.4% as of Aug 9th.
The average A-H premium changed by 1.5ppt week-on-week, led by consumer discretionary, information technology, energy and offset by utilities, health care.
We highlight weekly changes in A-H premium for Asymchem Lab, Shanghai Pharm, China Eastern, Air China, Smic, Hepalink, WuXi AppTec, Pharmaron, Hangzhou Tiger.


A-H Premium Weekly (Aug 9th): Asymchem Lab, Shanghai Pharm, China Eastern, Air China, Smic, Hepalink

China

Bank of Communications Co. Ltd. provides a full range of commercial banking services including RMB and foreign currency deposit, loan, international and domestic settlement, discount, currency trading, letter of credit, bank guarantee, and other related services.

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Bank Of Communications Co H (3328 HK)

Hang Seng Bank - China Profit -70% YoY, Stage 3 Loans +84% YoY, HK CRE Impaired Loan +12.5x (Times)

Granular data for Hang Seng Bank provides a good window of underlying credit metrics in both Hong Kong and China, which may not be well visible in...

Daniel Tabbush

China Banks - Losses at Developers, Notes to Financials at Some Banks, More Clear than Headlines

There are losses at China developers and some of this is new or losses are much higher. This is not fully reflected in headline figures at China...

Daniel Tabbush

Haitong Securities - Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue

Profit down 75% YoY and revenue down 32% YoY in latest results just out for 1H24. Risks still remain for this company, and potentially worsening...

Daniel Tabbush

Northbound Flows (Aug 16th): CATL

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlighted flows for CATL (ticker: 300750 CH).

Ke Yan, CFA, FRM

A-H Premium Weekly (Aug 9th): Asymchem Lab, Shanghai Pharm, China Eastern, Air China, Smic, Hepalink

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Asymchem Lab, Shanghai Pharm, China Eastern, Air China,...

Ke Yan, CFA, FRM

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