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

<ul>
<li>Singapore credit growth turned negative at -3% YoY in July where STAN has major exposure, while many regions, are not high growth, where credit metrics are worsening, like HK, China</li>
<li>88% of loans in well-developed countries, so that the old moniker of STAN being 'an Emerging Market Bank' may no longer apply, with NPLs as an overlying risk</li>
<li>Credit costs rose 6x from 1Q23 to 2Q23, but the 19bps level in 2Q23 remains low relative to its longer-term 62bps average - which excludes the Asian Financial Crisis</li>
</ul>


Singapore credit growth turned negative at -3% YoY in July where STAN has major exposure, while many regions, are not high growth, where credit metrics are worsening, like HK, China
88% of loans in well-developed countries, so that the old moniker of STAN being 'an Emerging Market Bank' may no longer apply, with NPLs as an overlying risk
Credit costs rose 6x from 1Q23 to 2Q23, but the 19bps level in 2Q23 remains low relative to its longer-term 62bps average - which excludes the Asian Financial Crisis


Standard Chartered - Singapore Credit Growth Negative In July | Credit Costs Up 6x QoQ But Still Low

<ul>
<li>Credit metrics appear worse than headlines, with what may be inflated substandard loans now at 66% of total NPLs in 1H23 compared with 21% in 1H21, requiring low provisions</li>
<li>High net charge-offs can partly explain this, but high growth from RMB1.6bn during 2H18/1H19 compared with RMB7.5bn during 2H22/1H23, shows major deterioration</li>
<li>2Q23 saw CZB take credit costs of RMB10.3bn or 2.48% of loans, far higher than most other periods, but there remains high volatility, where very high figures rarely repeat QoQ</li>
</ul>


Credit metrics appear worse than headlines, with what may be inflated substandard loans now at 66% of total NPLs in 1H23 compared with 21% in 1H21, requiring low provisions
High net charge-offs can partly explain this, but high growth from RMB1.6bn during 2H18/1H19 compared with RMB7.5bn during 2H22/1H23, shows major deterioration
2Q23 saw CZB take credit costs of RMB10.3bn or 2.48% of loans, far higher than most other periods, but there remains high volatility, where very high figures rarely repeat QoQ


China Zheshang Bank- Substandard Loans 66% of NPLs from 21% | NCO's Avg RMB7.5bn Vs RMB1.6bn In Past

China Merchants Bank A / Equity Bottom-Up

<ul>
<li>New results detail from CMB shows divergence with credit quality and actual credit costs</li>
<li>The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY</li>
<li>Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total</li>
</ul>


New results detail from CMB shows divergence with credit quality and actual credit costs
The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total


China Merchants Bank - New Results: Property Dev. NPLs at 5.5% from 4.1%...  25% Lower Credit Costs

Thematic (Sector/Industry)

<ul>
<li>Notes to financial statements show rampant deterioration in credit metrics for both banks</li>
<li>BEA's write-offs in property development impaired loans rise by 4.1x in 1H23 vs <em>FY22</em>
</li>
<li>Overdue loans by &gt;1yr rose 277% HoH in 1H23 at Dah Sing, but it <em>cut credit costs 48%</em>
</li>
</ul>


Notes to financial statements show rampant deterioration in credit metrics for both banks
BEA's write-offs in property development impaired loans rise by 4.1x in 1H23 vs FY22

Overdue loans by &gt;1yr rose 277% HoH in 1H23 at Dah Sing, but it cut credit costs 48%



BEA & Dah Sing - Rampant Deterioration in HK Credit Metrics, Not Totally Visible in Headline Results

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

Event-Driven

<ul>
<li>There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.</li>
<li>We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.</li>
<li>Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.</li>
</ul>


There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.


HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

Hong Kong

Dah Sing Banking Group Limited, through its subsidiaries, provides personal banking, commercial banking, and treasury services.  The Group's operations are primarily based in Hong Kong.

Bank of Tianjin Co. Ltd. operates as a commercial bank. The Company offers deposits, loans, investment banking, currency trading, investment management, credit cards, and other financial services.

Dah Sing Financial Holdings Ltd through its subsidiaries, offers general banking services. The Company also invests in properties and provides insurance broking and nominee services.

Public Financial Holdings Ltd, through its subsidiaries, operates in the deposit taking, personal and commercial lending, credit card, mortgage financing, stockbroking, and property investment businesses.  The Company also provides financing to purchasers of taxis and public light buses, leases taxis, and trades taxi cabs and taxi licenses.

China Zheshang Bank Co. Ltd. operates as a commercial bank. The Bank offers deposits, loans, international settlement, wealth management and other related financial services.

China Taiping Insurance Holdings Company Ltd., through subsidiaries, underwrites life and property/casualty insurance and reinsurance.

Guoco Group Limited, through its subsidiaries, develops, invests in, and manages properties as well as provides stock, commodity and bullion broking, insurance, and fund management services.

Far East Horizon Ltd is a financial services provider. The Company specializes in providing financing solutions through equipment-based financial leasing. Far East currently targets industries that include healthcare, education, infrastructure construction, shipping, printing and machinery industries.

China Development Bank Financial Leasing Co. Ltd. provides financial leasing services. The Company offers aircraft leasing, ship leasing, commercial vehicle leasing, construction machinery leasing, highway leasing, rail transit leasing, new energy leasing, enterprise equipment leasing, urban infrastructure leasing, house leasing, and other services. 

China Development Bank Financial Leasing (1606 HK)

First Pacific Company Limited is an investment holding company with operations located in Asia-Pacific. The Company principally invests in consumer food products, infrastructure, natural resources, and telecommunications.

AMMB Holdings Berhad is an investment holding company.  The Company, through its subsidiaries, provides merchant and commercial banking, retail financing, stock and futures broking, and investment advisory. AMMB also underwrites general insurance, provides asset and unit trust management, and nominees services.

Atlantic Union Bankshares Corporation provides banking services. The Bank checking accounts, lending, credit cards, online and mobile banking, and wealth and treasury management services. Atlantic Union Bankshares serves customers in the United States.

Community Bank System, Inc. is a holding company for Community Bank, N.A.  The Bank offers a range of commercial and retail banking services in each of its market areas to business, individual, agricultural, and governmental customers. Community Bank operates in northern New York to the southern tier, west to Lake Erie, and in northeastern Pennsylvania.

Cathay General Bancorp is the holding company for Cathay Bank.  The Bank accepts deposits and originates various loans, and offers trade financing, spot and forward contracts, internet banking, global investment services, and other services.  Cathay Bank operates in California, New York, Texas, Washington, and Massachusetts.

Fulton Financial Corporation is a multi-bank holding company. The Banks offer a full range of general retail and commercial banking services, including deposits, loans, equipment leasing and financing, and credit cards. Fulton operates in Pennsylvania, Maryland, Delaware, and New Jersey.

Huishang Bank Corporation Limited is a commercial bank. The Bank provides banking services including loans, money market operations, treasury business, investment and trading services, and valet transactions.

Taichung Commercial Bank conducts commercial banking and trust business.  The Bank accepts deposits, offers loans, as well as  invests in bonds and stocks. Taichung Commercial Banks provides bills and notes discounting, draft endorsement, domestic remittance, guarantee, and securities underwriting and brokerage services.

United Community Banks, Inc. is a multi-bank holding company with locations throughout north Georgia and western North Carolina.  The Banks are community oriented and offer retail and corporate banking services including checking, savings, and time deposit accounts, secured and unsecured loans, wire transfers, trust services, and rental of safe deposit boxes.

Associated Banc-Corp is a Midwest banking franchise headquartered in Green Bay, Wisconsin. The Bank offers a full range of financial products and services through banking locations serving communities throughout Wisconsin, Illinois, and Minnesota, and commercial financial services in Indiana, Michigan, Missouri, Ohio and Texas.

Mebuki Financial Group Inc. is a holding company established through the merger of Joyo Bank and Ashikaga Bank. As a financial group, the Company offers deposits, Loans, foreign exchange transactions, commercial and trust banking. Mebuki Financial Group also provides financial services such as letter of credit, credit cards and consulting.

The Bank of East Asia, Limited and its subsidiaries provide general banking, related financial, business corporate, and investor services.

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Bank of East Asia (23 HK)

Standard Chartered - Singapore Credit Growth Negative In July | Credit Costs Up 6x QoQ But Still Low

Sing credit -3% July, a key region for STAN. The old descriptive is no longer valid , 'The Emerging Market Bank', given its footprint. Credit costs...

Daniel Tabbush

China Zheshang Bank- Substandard Loans 66% of NPLs from 21% | NCO's Avg RMB7.5bn Vs RMB1.6bn In Past

Substandard loans are now 66% of NPLs up from 21% two years ago, potentially flattering credit costs. NCO's though are surging, possibly a good...

Daniel Tabbush

China Merchants Bank - New Results: Property Dev. NPLs at 5.5% from 4.1%... 25% Lower Credit Costs

CMB shows surging property development NPLs, and overdue loans by 1-3 years, which is completely at odds with its 25% lower provision expenses in...

Daniel Tabbush

BEA & Dah Sing - Rampant Deterioration in HK Credit Metrics, Not Totally Visible in Headline Results

Credit metrics worsening substantially at BEA and Dah Sing, and well beyond what is visible in headline figures. There are implications also for...

Daniel Tabbush

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds/ 27 deletes for the HSCI in Sep leading to 22 adds/ 24 deletes for Stock Connect. Since end June, shares held though Southbound...

Brian Freitas

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