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>
<a href="https://www.smartkarma.com/entities/bank-ozk" target="_blank" data-smartkarma-citation="entities:28708:1" rel="noopener">Bank OZK (OZK US)</a> has more CRE loans to total loans of any US bank at 72% in 3Q24</li>
<li>Risks of CRE loans are real now and historically, they have high loss rates, in bad times</li>
<li>The bank is seeing a surge in NPAs , but its credit costs are lagging - make up in 4Q24?</li>
</ul>



Bank OZK (OZK US) has more CRE loans to total loans of any US bank at 72% in 3Q24
Risks of CRE loans are real now and historically, they have high loss rates, in bad times
The bank is seeing a surge in NPAs , but its credit costs are lagging - make up in 4Q24?


Bank OZK - Most CRE Loans/Total Loans of Any US Bank & Dramatically Worsening Credit Metrics

<ul>
<li>HSBC holds 19% of BoCom and still carries it with a value of USD23.3bn despite the stock market valuation putting it closer to USD8.1bn on YE22 figures. </li>
<li>The bank cites its Value In Use testing as the justifiable reason for this gap, and this testing will include major assumptions like discount rates and long term growth rates.</li>
<li>Goodwill and other intangible charges were USD10.6bn in FY08, USD3.4bn in FY16, and USD7.4bn in FY19 for HSBC. </li>
</ul>


HSBC holds 19% of BoCom and still carries it with a value of USD23.3bn despite the stock market valuation putting it closer to USD8.1bn on YE22 figures. 
The bank cites its Value In Use testing as the justifiable reason for this gap, and this testing will include major assumptions like discount rates and long term growth rates.
Goodwill and other intangible charges were USD10.6bn in FY08, USD3.4bn in FY16, and USD7.4bn in FY19 for HSBC. 


HSBC - Gap of USD15bn on Carrying Value Vs Fair Value of BoCom, as China Economy Weakens More

Thematic (Sector/Industry)

<ul>
<li>US large banks are showing sharply expanding loans in recent weeks, in granular HFD</li>
<li>This comes as their higher cost Jumbo Time Deposits are now showing negative growth</li>
<li>There are positive implications for net interest income, NIM and net profit delta of large US banks</li>
</ul>


US large banks are showing sharply expanding loans in recent weeks, in granular HFD
This comes as their higher cost Jumbo Time Deposits are now showing negative growth
There are positive implications for net interest income, NIM and net profit delta of large US banks


US Banks - HFD Shows Sharply Expanding Loans, with Newly Negative Growth in Jumbo Time Deposits

<ul>
<li>Total impairment costs are soaring now at Citigroup up to USD3.5bn in 4Q23 compared with an average charge of USD1.8-1.9bn in the recent preceding quarters. </li>
<li>Net interest income appears to be topping out now, as there is generally a lagged impact on funding in a rising rate environment. </li>
<li>The implications of the Citi results, steeped in geopolitical risk, are not positive for large global banks, major US banks in particular and <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> specifically. </li>
</ul>


Total impairment costs are soaring now at Citigroup up to USD3.5bn in 4Q23 compared with an average charge of USD1.8-1.9bn in the recent preceding quarters. 
Net interest income appears to be topping out now, as there is generally a lagged impact on funding in a rising rate environment. 
The implications of the Citi results, steeped in geopolitical risk, are not positive for large global banks, major US banks in particular and HSBC Holdings (5 HK) specifically. 


Citigroup - Impairment Costs Far Higher than Any Recent Quarter & Net Interest Income near Halting

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ally-financial-inc" target="_blank" data-smartkarma-citation="entities:9683:1" rel="noopener">Ally Financial (ALLY US)</a> gave a poor view of now and the immediate future for credit costs within its primary loan book, used cars for subprime borrowers</li>
<li>There is often good read-through for mainstream banks and overall credit metrics, we saw this in Thailand before 1997 and in the US with Indymac, Countrywide, Household</li>
<li>If the Fed has a better view on granular data than one single finance company, we believe they will use this data when considering rate cut magnitude, <span><strong>next week</strong></span>
</li>
</ul>



Ally Financial (ALLY US) gave a poor view of now and the immediate future for credit costs within its primary loan book, used cars for subprime borrowers
There is often good read-through for mainstream banks and overall credit metrics, we saw this in Thailand before 1997 and in the US with Indymac, Countrywide, Household
If the Fed has a better view on granular data than one single finance company, we believe they will use this data when considering rate cut magnitude, next week



Ally Financial - Suggests Large Fed Cut, Credit Cost Guidance Worsening, Fringe Finco View Can Lead

United States

Citigroup Inc. is a diversified financial services holding company that provides a broad range of financial services to consumer and corporate customers. The Company services include investment banking, retail brokerage, corporate banking, and cash management products and services. Citigroup serves customers globally.

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Citigroup Inc (C US)

Bank OZK - Most CRE Loans/Total Loans of Any US Bank & Dramatically Worsening Credit Metrics

Commercial real estate (CRE) loans are risky in the US normally and especially now. Bank OZK is most exposed, with dramatic worsening of credit...

Daniel Tabbush

HSBC - Gap of USD15bn on Carrying Value Vs Fair Value of BoCom, as China Economy Weakens More

HSBC still carries its 19% investment in BoCom at a very high value compared with the market value and with a far weaker China outlook, we are not...

Daniel Tabbush

US Banks - HFD Shows Sharply Expanding Loans, with Newly Negative Growth in Jumbo Time Deposits

US large banks show loans accelerating (but not riskier CRE loans) and with higher cost Jumbo time deposit growth now turning negative in new...

Daniel Tabbush

Citigroup - Impairment Costs Far Higher than Any Recent Quarter & Net Interest Income near Halting

Citigroup is now seeing its impairment costs far higher than any recent quarter, and much of this is from unfunded commitments. Its net interest...

Daniel Tabbush

Ally Financial - Suggests Large Fed Cut, Credit Cost Guidance Worsening, Fringe Finco View Can Lead

New disclosure, comments, guidance from Ally Financial show a major deterioration in credit metrics now, in coming months, which can mean a larger...

Daniel Tabbush

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