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/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> saw its net profit surge from non-recurring gains, which was from the sale of stocks.  </li>
<li>The company's cost of funds worsened more than the improvement in its yields, and we believe this remains an issue related to hedging costs. </li>
<li>Unrealized gains on foreign bonds remains significantly higher now than a year ago and this may again be the driver for earnings, but still with very low ROA. </li>
</ul>



Japan Post Bank (7182 JP) saw its net profit surge from non-recurring gains, which was from the sale of stocks.  
The company's cost of funds worsened more than the improvement in its yields, and we believe this remains an issue related to hedging costs. 
Unrealized gains on foreign bonds remains significantly higher now than a year ago and this may again be the driver for earnings, but still with very low ROA. 


Japan Post Bank - It's like a Closed End Mutual Fund More Than Ever

Thematic (Sector/Industry)

<ul>
<li>What's new is that Japan's domestic credit growth is accelerating, and it's now better than in Singapore, for instance; accelerating to 2.51% YoY in July from 0.77% February low</li>
<li>Loan growth and higher JGB yields, both matter for net interest income, and margins. Two year JGB yields are 0.035% on 22 September compared with -0.075% on 30 June.</li>
<li>Profit delta can rise further for Japan's banks due to better NPLs, with the largest banks' credit costs/loans moving to 5bps in 1Q24, vs 21bps in 4Q22, 11bps in 1Q23</li>
</ul>


What's new is that Japan's domestic credit growth is accelerating, and it's now better than in Singapore, for instance; accelerating to 2.51% YoY in July from 0.77% February low
Loan growth and higher JGB yields, both matter for net interest income, and margins. Two year JGB yields are 0.035% on 22 September compared with -0.075% on 30 June.
Profit delta can rise further for Japan's banks due to better NPLs, with the largest banks' credit costs/loans moving to 5bps in 1Q24, vs 21bps in 4Q22, 11bps in 1Q23


Japan Banks - Accelerating Domestic Credit | JGB Yields Higher | Provisions -79% QoQ & -58% YoY

<ul>
<li>Of the nearly 200 financials in Japan, on average shares outstanding are up 3% over the past several years </li>
<li>Japan Post Insurance, Japan Post Holdings, and Yamaguchi Financial are at the extreme opposite end with shares outstanding at -22%</li>
<li>MS&amp;AD features well ranking #11 of financials in our sample, with shares outstanding at -7%, adding well to its commitment on dividends, cross-shareholdings sales</li>
</ul>


Of the nearly 200 financials in Japan, on average shares outstanding are up 3% over the past several years 
Japan Post Insurance, Japan Post Holdings, and Yamaguchi Financial are at the extreme opposite end with shares outstanding at -22%
MS&amp;AD features well ranking #11 of financials in our sample, with shares outstanding at -7%, adding well to its commitment on dividends, cross-shareholdings sales


Japan Financials - Buybacks Strongest at Japan Post Insurance, Japan Post Holdings, Yamaguchi

<ul>
<li>We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.</li>
<li>Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.</li>
<li>Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.</li>
</ul>


We derive which of Japan's banks may be most or least exposed to trading gains from divestment of cross-shareholdings.
Mizuho looks best of the megabanks and SMFG looks least good of the megabanks.
Japan Post Bank and SBI Shinsei may appear to have a high potential for selling domestic stocks, but we believe other drivers make them appear this way.


Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.</li>
<li>92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.</li>
<li>Big tables with data, reasons for guidance changes, and buyback history of each presented below.</li>
</ul>


40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.


Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

Japan

The Chiba Bank, Ltd. is a regional bank based in Chiba Prefecture. The Bank offers general banking services including deposits, loans, and foreign exchange transactions. The Chiba Bank also develops software and provides financial services such as leasing, securities brokerage, letter of credit, and credit cards.

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

Mebuki Financial Group Inc. is a holding company established through the merger of Joyo Bank and Ashikaga Bank. As a financial group, the Company offers deposits, Loans, foreign exchange transactions, commercial and trust banking. Mebuki Financial Group also provides financial services such as letter of credit, credit cards and consulting.

SBI Shinsei Bank, Ltd. provides banking services including deposits, loans, and foreign exchange transaction, as well as investment trust service and issuance of long-term bonds.

Concordia Financial Group, Ltd. is a holding company established through the merger of Bank of Yokohama and Higashi-Nippon Bank. The Company provides banking services and other financial services.

Rakuten Bank, Ltd. operates as an Internet based bank. The Company provides banking services including deposits, loans, exchange transactions, and other services. Rakuten Bank also provides financial services including investment trusts, securities, credit and cash cards, lottery tickets, and others.

The Hachijuni Bank, Ltd. is a regional bank based in Nagano Prefecture. The Bank provides banking services such as deposits, loans, foreign exchange transactions, and trust accounts. The Bank also provides financial services such as leasing, credit cards, credit guarantee, debt recovery, trading, and venture capital and operates branches overseas.

Aozora Bank, Ltd. provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments. Aozora Bank also provides services such as trust account, resolution and collection, and venture capital.

The Gunma Bank, Ltd. is a regional bank based in Gunma Prefecture.  The Bank provides banking services such as deposits, loans, and foreign exchange transaction.  The Gunma Bank also provides financial services such as leasing, credit cards, letter of credit, and investment advisory, and develops information systems.

Yamaguchi Financial Group, Inc. is a holding company established through the merger of Yamaguchi Bank and Momiji Holdings. The Group provides variety of financial services such as deposits, loans, foreign exchange transactions, leasing and credit cards.

Bank of Ayudhya Public Company Limited provides a full range of banking and financial services.  The Bank offers corporate and personal lending, retail and wholesale banking, international trade financing, asset management and investment banking services, to customers through its nationwide branches. It also has branches in Hong Kong, Vietnam, Laos, and Cayman Islands.

Columbia Banking System, Inc. is the holding company for Columbia Bank, a full service commercial bank.  The Bank serves small and medium-sized businesses, professionals, and other individuals through office in the Tacoma metropolitan area and contiguous parts of the Puget Sound region of Washington, as well as the Longview and Woodland communities in southwestern Washington.

First Financial Bankshares, Inc. is a multi-bank holding company. The Company operates several banks located in Texas. The Banks accept deposits, originate loans, transmit funds, and perform other banking services.

Glacier Bancorp, Inc. is a multi-bank holding company.  The Banks attract deposits from the general public and use those funds to originate a variety of commercial and consumer loans.

Metropolitan Bank & Trust Company offers commercial and investment banking services. The Bank's business activities include borrowing and lending, trade finance, remittances, treasury, investment banking and savings.

Chongqing Rural Commercial Bank Co.,Ltd. provides various types of personal and corporate banking and financial services.  The Company's services including deposits, loans and bonds, domestic clearing, bank card, bill discounting, agent distribution, cashing and underwriting government bonds, guarantees, and payments and insurance agency .

Chongqing Rural Commercial Bank (3618 HK)

Bendigo and Adelaide Bank Limited offers a variety of banking and other financial services, including first mortgage housing finance, retail and business banking, commercial finance, funds management, treasury and foreign exchange services, superannuation and trustee services. Bendigo also offers internet banking.

Punjab & Sind Bank is a commercial bank. The Bank offers its customers a wide range of banking products and services.

TMBThanachart Bank Public Company Limited provides a full range of banking and financial services. The Bank offers corporate and personal lending, retail and wholesale banking, international trade financing, and investment banking services to its customers throughout Thailand.  It also has branches in Hong Kong, Laos, and Cayman Island.

Hancock Whitney Corporation operates bank offices and financial centers. The Bank offers financial products and services, such as checking and savings accounts, currency exchange, loans, overdraft facilities, cards, mortgages, investments, treasury management, commercial financing, and online banking services. Hancock Whitney serves customers in the United States.

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

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Fukuoka Financial Group (8354 JP)

Japan Post Bank - It's like a Closed End Mutual Fund More Than Ever

Japan Post Bank is more than ever like a closed-end mutual fund, which is hardly seeing any line items drive profit upward other than stock sales,...

Daniel Tabbush

Japan Banks - Accelerating Domestic Credit | JGB Yields Higher | Provisions -79% QoQ & -58% YoY

Japan's banks are seeing accelerating domestic credit growth, better than Singapore now. JGB yields remain higher than in the past, credit costs...

Daniel Tabbush

Japan Financials - Buybacks Strongest at Japan Post Insurance, Japan Post Holdings, Yamaguchi

Share buybacks at Japan's financials are particularly strong at Japan Post Insurance, Japan Post Holdings, and Yamaguchi. MS&AD also stands out...

Daniel Tabbush

Japan Banks - Trading Gains and Cross-Shareholding Vary Widely Among Megabanks and Regionals

We look at how important or unimportant core banking income is to 50 banks in Japan, to better understand where divesting cross shareholding can be...

Daniel Tabbush

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down - Opportunity Abounds, Still

The macro backdrop for Japanese banks is pretty good. Business restructuring efforts are bearing fruit. Global macro is adding fees. Stocks are up,...

Travis Lundy

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