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>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 FY22
</li>
<li>Overdue loans by &gt;1yr rose 277% HoH in 1H23 at Dah Sing, but it cut credit costs 48%
</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

Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

Asia biased macro & technical analysis

A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

Technical Analysis

Country Garden Holdings Co / Technical Analysis

<ul><li>The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main drivers of the continued rally early in the week.</li><li>What has been very different in this rally is the robust Southbound Inflows indicating strong interest from mainland investors but (yes, there is always one) it does not tie up the sharp rise in short-end HIBOR.</li><li>The HIBOR rise could be due to the drawdown of the large-margin loan in support of this rally. I have not found data to support or rebuff such a thesis.</li></ul>

The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main drivers of the continued rally early in the week.What has been very different in this rally is the robust Southbound Inflows indicating strong interest from mainland investors but (yes, there is always one) it does not tie up the sharp rise in short-end HIBOR.The HIBOR rise could be due to the drawdown of the large-margin loan in support of this rally. I have not found data to support or rebuff such a thesis.

HIBOR, Country Garden, Meituan, Tencent, and HSBC

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<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> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0128/2022012800929.pdf" target="_blank" rel="noopener">announced</a> last Friday it intends to buy back 8.43% of shares out from Elliott Investment Management for HK$2.9bn ($373mn), paying HK$11.19/share.</li>
<li>The share buyback is expected to result in a 6% increase in the consolidated net asset value per share.</li>
<li>Conditions to the buyback appear straightforward. BEA is trading cheap at 0.3x P/B. </li>
</ul>



Bank of East Asia (23 HK) announced last Friday it intends to buy back 8.43% of shares out from Elliott Investment Management for HK$2.9bn ($373mn), paying HK$11.19/share.
The share buyback is expected to result in a 6% increase in the consolidated net asset value per share.
Conditions to the buyback appear straightforward. BEA is trading cheap at 0.3x P/B. 


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.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Dah Sing Banking (2356 HK)

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

HIBOR, Country Garden, Meituan, Tencent, and HSBC

The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main...

Untying The Gordian Knot

What Now For BEA After Elliott Walks?

This buyback removes a significant long-term overhang. At the current price, BEA is simply inexpensive. I'd be picking up shares around these levels.

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)