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

<p>There are few banks in the US or in Texas that have seen as much credit costs during 1Q20 as <a href="https://www.smartkarma.com/entities/cullen-frost-bankers-inc" target="_blank" data-smartkarma-citation="entities:15004:1" rel="noopener">Cullen/Frost Bankers (CFR US)</a>. While both <a href="https://www.smartkarma.com/entities/jpmorgan-chase-co" target="_blank" data-smartkarma-citation="entities:277:1" rel="noopener">JPMorgan Chase &amp; Co (JPM US)</a> and <a href="https://www.smartkarma.com/entities/wells-fargo-co" target="_blank" data-smartkarma-citation="entities:232:1" rel="noopener">Wells Fargo &amp; Co (WFC US)</a> did not see any reduction in credit costs in 2Q20 QoQ, we believe it is a matter of time. This is especially the case given the approximate doubling of oil prices in the past few months. Perhaps CFR is a purer play on such a provision reduction than these two large US money center banks, and quite possibly more similar to Norway’s <a href="https://www.smartkarma.com/entities/dnb-asa" target="_blank" data-smartkarma-citation="entities:22227:1" rel="noopener">DNB ASA (DNB NO)</a>? Earnings from lower provisions during 2Q20 or 2H20 can be significantly higher.</p>

There are few banks in the US or in Texas that have seen as much credit costs during 1Q20 as Cullen/Frost Bankers (CFR US). While both JPMorgan Chase &amp; Co (JPM US) and Wells Fargo &amp; Co (WFC US) did not see any reduction in credit costs in 2Q20 QoQ, we believe it is a matter of time. This is especially the case given the approximate doubling of oil prices in the past few months. Perhaps CFR is a purer play on such a provision reduction than these two large US money center banks, and quite possibly more similar to Norway’s DNB ASA (DNB NO)? Earnings from lower provisions during 2Q20 or 2H20 can be significantly higher.

Cullen/Frost Bankers – Higher Oil, Less Provisions?

Thematic (Sector/Industry)

<p>We must expect some degree of higher NPL formation at banks in Texas due to lower oil prices. But in the current environment that will be compounded with more traditional credit stresses from the shutdown; many Banks in Texas  have a high level of CRE loans. We look at how banks fare with recent credit growth, with the concern that some have grown incredibly fast into the downturn. While the Texas Ratio may be good at identifying which banks have more capital and provisions compared with impaired and loan loans, we feel it can also lag; credit growth can be a better lead indicator of future stresses.</p>

We must expect some degree of higher NPL formation at banks in Texas due to lower oil prices. But in the current environment that will be compounded with more traditional credit stresses from the shutdown; many Banks in Texas  have a high level of CRE loans. We look at how banks fare with recent credit growth, with the concern that some have grown incredibly fast into the downturn. While the Texas Ratio may be good at identifying which banks have more capital and provisions compared with impaired and loan loans, we feel it can also lag; credit growth can be a better lead indicator of future stresses.

United States

Cullen/Frost Bankers, Inc. is the holding company for The Frost National Bank. The Bank provides commercial banking, consumer services, investment banking, international banking, trust services, correspondent banking, discount brokerage, and insurance services through a network of offices in Texas.

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Cullen/Frost Bankers (CFR US)

Cullen/Frost Bankers – Higher Oil, Less Provisions?

There are few banks in the US or in Texas that have seen as much credit costs during 1Q20 as Cullen/Frost Bankers (CFR US). While both JPMorgan...

Daniel Tabbush

Texas Banks – Oversized Loan Growth

We must expect some degree of higher NPL formation at banks in Texas due to lower oil prices. But in the current environment that will be...

Daniel Tabbush

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