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>Data from <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> is just out with poor 1H24 results YoY</li>
<li>Notable in its release are its Hong Kong overdue exposure by over three months</li>
<li>Hong Kong region income is the worst affected by credit costs, this does not seem to be over</li>
</ul>


Data from Bank of East Asia (23 HK) is just out with poor 1H24 results YoY
Notable in its release are its Hong Kong overdue exposure by over three months
Hong Kong region income is the worst affected by credit costs, this does not seem to be over


BEA - Far Worse Deterioration in Hong Kong than Other Regions & Sharply Lower HFD Centa City Index

Thematic (Sector/Industry)

<ul>
<li>Domestic credit growth in Hong Kong weakened further in latest monthly release at -2.2% YoY. Weekly Centa City Leading Index grinds lower, a more HFD point relevant to credit</li>
<li>The acceleration in domestic credit growth in Indonesia is unique, where growth is up to +11.2% YoY in most recent month vs +5.2% YoY in the same month last year  </li>
<li>We remain concerned about credit metrics for HK's banks given contracting growth, worsening property, which is collateral. Many HK banks have done little in provisioning </li>
</ul>


Domestic credit growth in Hong Kong weakened further in latest monthly release at -2.2% YoY. Weekly Centa City Leading Index grinds lower, a more HFD point relevant to credit
The acceleration in domestic credit growth in Indonesia is unique, where growth is up to +11.2% YoY in most recent month vs +5.2% YoY in the same month last year  
We remain concerned about credit metrics for HK's banks given contracting growth, worsening property, which is collateral. Many HK banks have done little in provisioning 


Asia Credit - HK Weakens More, Indonesia, Taiwan Remain Strong, and Improving

<ul>
<li>HK &amp; China CRE credit impaired loans are rising sharply and high in 3Q23. We believe there is risk that the bank has to take much higher credit costs. </li>
<li>Not only Mainland China CRE where there are risks. HSBC shows its ECL coverage ratio for HK CRE rising 45% over the past nine months, from 4Q22 to 3Q23. </li>
<li>LT credit costs shows HSBC's provisioning is like during a benign environment, at ~1/3 of its LT average. Its +34% QoQ credit costs in 4Q22 is worth keeping in mind. </li>
</ul>


HK &amp; China CRE credit impaired loans are rising sharply and high in 3Q23. We believe there is risk that the bank has to take much higher credit costs. 
Not only Mainland China CRE where there are risks. HSBC shows its ECL coverage ratio for HK CRE rising 45% over the past nine months, from 4Q22 to 3Q23. 
LT credit costs shows HSBC's provisioning is like during a benign environment, at ~1/3 of its LT average. Its +34% QoQ credit costs in 4Q22 is worth keeping in mind. 


HSBC - HK & China CRE Credit Impaired Loans Now 25.8% from 20.2% | ECL Coverage for HK CRE up 45%

<ul>
<li>Our focus is not on the decimation of earnings at <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> but rather the granular detail of stage 2 and stage 3 loans</li>
<li>There is tremendous growth in stage 2 loans in the quarter, which means the bank enters the quarter with a far higher pool that can migrate to stage 3</li>
<li>Stage 3 remains markedly higher provisions, and the bank's rise in credit costs is still fairly low, it can rise another 50% before hitting average rates </li>
</ul>


Our focus is not on the decimation of earnings at Standard Chartered (STAN LN) but rather the granular detail of stage 2 and stage 3 loans
There is tremendous growth in stage 2 loans in the quarter, which means the bank enters the quarter with a far higher pool that can migrate to stage 3
Stage 3 remains markedly higher provisions, and the bank's rise in credit costs is still fairly low, it can rise another 50% before hitting average rates 


STAN - Stage 2 Loans Surge | Expect Migration to Stage 3 Loans | Credit Costs Can Move 50% Higher

<ul>
<li>There is a sharp and accelerating rise in deposits with Hong Kong's banks, likely from Mainland China in part</li>
<li>There is no offsetting lending volume, where loan growth remains still negative, not a positive combination for net interest income</li>
<li>The LDR for Hong Kong's banks is fast approaching the distressed levels seen during the Global Financial Crisis (GFC)</li>
</ul>


There is a sharp and accelerating rise in deposits with Hong Kong's banks, likely from Mainland China in part
There is no offsetting lending volume, where loan growth remains still negative, not a positive combination for net interest income
The LDR for Hong Kong's banks is fast approaching the distressed levels seen during the Global Financial Crisis (GFC)


HK Banks - Surging Deposits and Contracting Loans, Sees LDR Fall Toward GFC Levels

Hong Kong

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)

BEA - Far Worse Deterioration in Hong Kong than Other Regions & Sharply Lower HFD Centa City Index

BEA just released 1H24 net profit - not good. Granular data shows most deterioration in HK region. HFD in real estate, lending suggests this is not...

Daniel Tabbush

Asia Credit - HK Weakens More, Indonesia, Taiwan Remain Strong, and Improving

Domestic credit growth HFD shows weakening figures in Hong Kong, far better figures and strong in Indonesia, and still strong, rising in Taiwan....

Daniel Tabbush

HSBC - HK & China CRE Credit Impaired Loans Now 25.8% from 20.2% | ECL Coverage for HK CRE up 45%

NYCB, Aozora, now Pfandbriefbank in Germany, CRE risks are clear. HSBC is not only exposed in places like Hong Kong and China, but also material...

Daniel Tabbush

STAN - Stage 2 Loans Surge | Expect Migration to Stage 3 Loans | Credit Costs Can Move 50% Higher

STAN's traditional credit costs are surging and remain well below long term averages. Rising stage 2 loans are the real concern, with migration...

Daniel Tabbush

HK Banks - Surging Deposits and Contracting Loans, Sees LDR Fall Toward GFC Levels

Hong Kong's banks are seeing surge in deposits, likely from Mainland China, but this is not accompanied by loan growth, where this is in...

Daniel Tabbush

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