Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

Next in line to confess their sins after <a href="https://www.smartkarma.com/entities/6599" target="_blank" data-smartkarma-citation="entities:6599:1">Michinoku Bank (8350 JP)</a> (see our Insight <a href="https://www.smartkarma.com/insights/michinoku-bank-8350-jp-clipped-by-a-synthetic-hedge" target="_blank" data-smartkarma-citation="insights:29415">Michinoku Bank  (8350 JP):  Clipped by a Synthetic Hedge</a> ) and admit that their earnings guidance was way too optimistic are the directors of <a href="https://www.smartkarma.com/entities/26193" target="_blank" data-smartkarma-citation="entities:26193:1">First Bank Of Toyama (7184 JP)</a> .  This small secondary regional bank from Toyama Prefecture in the Hokuriku Region of central Japan has cut its full-year earnings forecast for consolidated recurring profits by 33% and net profits by 25%, citing greater than expected losses on sales of equities and rising credit costs.  But this only tells part of the story: the new profit figures suggest heavy net losses may have been incurred in 4Q (January-March 2019) of up to ¥490 million related to the bank’s large securities portfolio.  Two recurring features of this wholly-domestic bank’s past financial results have been losses on its share portfolio and a relentless rise in the level of foreign securities as management has struggled to find alternative sources of revenue to offset declining loan interest and fee income.  The bank’s unrealised gains in its securities portfolio fell ¥11 billion (US$98 million) in 3Q FY3/2019 to just ¥636 million.  Something is terribly wrong here.  Caveat emptor!  (May the buyer beware!)

Next in line to confess their sins after Michinoku Bank (8350 JP) (see our Insight Michinoku Bank  (8350 JP):  Clipped by a Synthetic Hedge ) and admit that their earnings guidance was way too optimistic are the directors of First Bank Of Toyama (7184 JP) .  This small secondary regional bank from Toyama Prefecture in the Hokuriku Region of central Japan has cut its full-year earnings forecast for consolidated recurring profits by 33% and net profits by 25%, citing greater than expected losses on sales of equities and rising credit costs.  But this only tells part of the story: the new profit figures suggest heavy net losses may have been incurred in 4Q (January-March 2019) of up to ¥490 million related to the bank’s large securities portfolio.  Two recurring features of this wholly-domestic bank’s past financial results have been losses on its share portfolio and a relentless rise in the level of foreign securities as management has struggled to find alternative sources of revenue to offset declining loan interest and fee income.  The bank’s unrealised gains in its securities portfolio fell ¥11 billion (US$98 million) in 3Q FY3/2019 to just ¥636 million.  Something is terribly wrong here.  Caveat emptor!  (May the buyer beware!)

First Bank of Toyama (7184 JP):  Never Say Never (Again)

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.

Thematic (Sector/Industry)

The Bank of Japan (BOJ) offers negative interest rates on monies deposited. Japan’s banks are largely wholesale, with lumpy corporate loans and in many cases, where they look after corporate interests more than shareholders. Some consider the largest banks in Japan like closed-end mutual funds - but with credit risk -due to their gigantic equity holdings. These all remain valid reasons to shun Japan’s banks in favor of others in the region.  Credit costs are another concern. With BOJ’s new announcement of continuing low rates there remains even less hope that loan volume will support profit and that NIM pressure will remain. A negative delta in credit costs is not easily absorbed by anaemic ROA.

The Bank of Japan (BOJ) offers negative interest rates on monies deposited. Japan’s banks are largely wholesale, with lumpy corporate loans and in many cases, where they look after corporate interests more than shareholders. Some consider the largest banks in Japan like closed-end mutual funds - but with credit risk -due to their gigantic equity holdings. These all remain valid reasons to shun Japan’s banks in favor of others in the region.  Credit costs are another concern. With BOJ’s new announcement of continuing low rates there remains even less hope that loan volume will support profit and that NIM pressure will remain. A negative delta in credit costs is not easily absorbed by anaemic ROA. 

Japan

The First Bank of Toyama, Ltd. is a regional bank based in Toyama prefecture.  The Bank provides commercial banking services including deposits, savings, loans, foreign exchange transactions. The First Bank of Toyama also provides information and financial services such as leasing and securities investments.

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First Bank Of Toyama (7184 JP)

First Bank of Toyama (7184 JP): Never Say Never (Again)

Next in line to confess their sins after Michinoku Bank (8350 JP) (see our Insight Michinoku Bank (8350 JP): Clipped by a Synthetic Hedge ) and...

J. Brian Waterhouse

Japan Banks – Unloved for Many Reasons

The Bank of Japan (BOJ) offers negative interest rates on monies deposited. Japan’s banks are largely wholesale, with lumpy corporate loans and in...

Daniel Tabbush

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