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

We are sure that most people have seen Novak Djokovic play tennis.If so, we all know that even he can not place the ball in the far corner of the court, at the baseline, all the time. There are too many variables, and he is not a robot. All the practice in the world will not change this; sometimes he will miss; sometimes other factors will overshadow his competency.But can a bank hit the shot all the time?

We are sure that most people have seen Novak Djokovic play tennis.If so, we all know that even he can not place the ball in the far corner of the court, at the baseline, all the time. There are too many variables, and he is not a robot. All the practice in the world will not change this; sometimes he will miss; sometimes other factors will overshadow his competency.But can a bank hit the shot all the time?

HDFC Bank's Profit Growth Seems Crafted To A Degree

Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately starting to play out; although markets currently feel very oversold and could rally sharply over the short term, we believe that there is further downside for EM equities in absolute and relative terms over the remainder of the year.

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately starting to play out; although markets currently feel very oversold and could rally sharply over the short term, we believe that there is further downside for EM equities in absolute and relative terms over the remainder of the year.

Thematic (Sector/Industry)

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%, which is not overly worrisome, but nonetheless it remains substantial.Indonesia tops the charts due to less well-known banks, and many that are subsidiaries from banks outside the country. On average NPL formation for Indonesia’s listed banks is 87% but when including only the major domestic banks the figure is less dramatic at 31%.  At the very least,…

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%, which is not overly worrisome, but nonetheless it remains substantial.Indonesia tops the charts due to less well-known banks, and many that are subsidiaries from banks outside the country. On average NPL formation for Indonesia’s listed banks is 87% but when including only the major domestic banks the figure is less dramatic at 31%.  At the very least,…

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

While investors are divided in their opinions on whether the 11 newly licensed Indian payment banks will complement the existing banking infrastructure or disrupt it, we are of the opinion that payment banks will complement full-service banks.Given the limited purview of services that payment banks are allowed to offer a customer, they will miss the two most important benefits of running a banking franchise:<ol><li class="p1">a low cost of funds through large sticky customer deposits;</li><li class="p1">the ability to lend money at a rate commensurate with risk taken.</li></ol>As a result of these limitations, we believe the payment bank business model is a no-moat one, and will mainly be volume-driven on a thin margin and fees earned from additional services sold for full-service banks through a lead-generation model.Our narrow moat ratings on Indian banks therefore remain intact.Analyst: Suruchi Jain

While investors are divided in their opinions on whether the 11 newly licensed Indian payment banks will complement the existing banking infrastructure or disrupt it, we are of the opinion that payment banks will complement full-service banks.Given the limited purview of services that payment banks are allowed to offer a customer, they will miss the two most important benefits of running a banking franchise:a low cost of funds through large sticky customer deposits;the ability to lend money at a rate commensurate with risk taken.As a result of these limitations, we believe the payment bank business model is a no-moat one, and will mainly be volume-driven on a thin margin and fees earned from additional services sold for full-service banks through a lead-generation model.Our narrow moat ratings on Indian banks therefore remain intact.Analyst: Suruchi Jain

Payment Banks Will Drive Distribution Reach and Prove Complementary to Indian Banks

<ul><li>We have written previously on why <a href="http://www.smartkarma.com/insights/324ae38b-37f4-4a65-940b-038231905ff2" target="_blank" data-smartkarma-citation="insights:1743">The World of Banking is Becoming Ever More Polarized</a>,</li><li>In our next report, <a href="http://www.smartkarma.com/insights/tlac-regulations-will-destroy-banks-as-much-as-it-saves-them" target="_blank" data-smartkarma-citation="insights:1776">TLAC Regulations Will Destroy Banks as Much as it Saves Them</a>, we focussed in on the negative side of the barbell, the banks that are set to struggle.</li><li>In this report we balance the scale, and discuss the positive end of the barbell. Those banks which are continuing to flourish, and are well placed to take advantage of the weakness of their competitors.</li><li>What is interesting in the world of increased banking regulation, and less leverage in particular, is how well most banks in South East Asia fare. But also, how some banks compare very well vs. others in the region.</li></ul>

We have written previously on why The World of Banking is Becoming Ever More Polarized,In our next report, TLAC Regulations Will Destroy Banks as Much as it Saves Them, we focussed in on the negative side of the barbell, the banks that are set to struggle.In this report we balance the scale, and discuss the positive end of the barbell. Those banks which are continuing to flourish, and are well placed to take advantage of the weakness of their competitors.What is interesting in the world of increased banking regulation, and less leverage in particular, is how well most banks in South East Asia fare. But also, how some banks compare very well vs. others in the region.

45 Banks in SE Asia Can Grow for 10 Years Without Need for Capital

India

State Bank of India provides a wide range of banking and financial services to corporate, institutional, commercial, agricultural, industrial and individual customers throughout India.  The Bank also provides international banking to its Indian customers and has operations in other countries.

ICICI Bank Limited operates as a bank. The Bank offers saving accounts, loans, debit, credit cards, insurance, investments, mortgages, and online banking services. ICICI Bank serves customers worldwide.

HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.

Kotak Mahindra Bank Limited is a full service commercial bank. The Bank offers a wide range of products and services such as personal, commercial, and corporate banking services, including deposit accounts, loans, and investments. Kotak Mahindra Bank serves customers in India.

Axis Bank Limited provides a full range of banking services throughout India. The Group's activities include retail banking, investment management, merchant banking, treasury and NRI services, cash and credit management services, and ATM facilities.

Punjab National Bank provides financial services such as corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. The Company provides services to domestic conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies.

Bank of Baroda owns and operates commercial banks in India.  The Group's banks provide the traditional forms of banking services, including CD's, Credit Card services and a variety of car loans, in addition to gold banking and a range of insurance services.  The Group also owns IBU International Finance Limited, an international banking company in Hong Kong.

IndusInd Bank Limited is a Mumbai-based Indian new generation bank established in 1994. The Bank provides a range of banking and financial services including  wholesale banking, credit monitoring, risk management, tele-banking, investment banking and commercial lending. IndusInd Bank operates branches throughout India as well as an office in Dubai and London.

Indian Overseas Bank operates some 1,429 banking branches in India, as well as six branches in overseas locations.  The Group's banks provide loan and deposit schemes, Internet banking, and a full range of banking services.

Canara Bank Ltd. provides a full range of banking services throughout India. The Group's activities include retail banking, commercial and personal banking, investment management, treasury & NRI services, cash management and assorted ATM facilities.

Commonwealth Bank of Australia provides banking, life insurance, and related services for individuals, small businesses and medium sized commercial enterprises. The Bank provides corporate and general banking, international financing, institutional banking and stock broking and funds management such as superannuation product.

National Australia Bank Limited is an international banking group which operates in Australia, New Zealand, Europe, Asia and the United States.  The Group offers banking services, credit and access card facilities, leasing, housing and general finance, international and investment banking, wealth and funds management, life insurance and custodian, trustee and nominee services.

DBS Group Holdings Limited and its subsidiaries provide a variety of financial services.  The Company offers services including mortgage financing, lease and hire purchase financing, nominee and trustee, funds management, corporate advisory and brokerage .  DBS Group also acts as the primary dealer in Singapore government securities.

China Construction Bank Corporation provides a comprehensive range of commercial banking products and services to individuals and corporate customers. The Bank's business consists of three principal business segments: corporate banking, personal banking, and treasury operations. China Construction Bank also services infrastructure loans, residential mortgage, and bank cards.

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

Sumitomo Mitsui Financial Group, Inc. manages financial operations for its subsidiaries. The Company provides commercial banking and a variety of financial services.

Sumitomo Mitsui Financial Group (8316 JP)

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Mizuho Financial Group, Inc. provides comprehensive financial services through its subsidiaries. The Group provides variety of financial services such as general banking, securities brokerage, trust banking, and assets management.

Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance.  The Company operates through physical stores, the Internet and other distribution channels across North America and elsewhere internationally.

PNC Financial Services Group, Inc. is a diversified financial services organization.  The Company provides regional banking, wholesale banking, and asset management services nationally and in the Company's primary regional markets.

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HDFC Bank (ADR) (HDB US)

HDFC Bank's Profit Growth Seems Crafted To A Degree

We are sure that most people have seen Novak Djokovic play tennis.If so, we all know that even he can not place the ball in the far corner of the...

Daniel Tabbush

China and the EM Ugly Contest

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately...

John-Paul Smith

A Gradual NPL Cycle in Asia

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%,...

Daniel Tabbush

Payment Banks Will Drive Distribution Reach and Prove Complementary to Indian Banks

While investors are divided in their opinions on whether the 11 newly licensed Indian payment banks will complement the existing banking...

Morningstar, Inc.

45 Banks in SE Asia Can Grow for 10 Years Without Need for Capital

We have written previously on why The World of Banking is Becoming Ever More Polarized, In our next report, TLAC Regulations Will Destroy Banks as...

Daniel Tabbush

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