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

The final quarter of 2016 was a loss for <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. The final quarter of 2017 saw profit down 91% YoY. The final quarter of 2018 was far better than either of the above periods; profit was down only 44% YoY. For 4Q14 and 4Q15, it’s the same – losses or sizeable profit reduction There is a distinct pattern with HSBC. The 4th quarter of the last few years has been especially dismal compared with other quarters. To be fair, some other banks have a similarly weak final quarter, but HSBC remains unique given its footprint, its management disarray and its fall from grace. The risk to an incredibly poor quarter appears amplified and we wonder if the temporary CEO will use this as an opportunity to try to start the year clean.

The final quarter of 2016 was a loss for HSBC Holdings (5 HK). The final quarter of 2017 saw profit down 91% YoY. The final quarter of 2018 was far better than either of the above periods; profit was down only 44% YoY. For 4Q14 and 4Q15, it’s the same – losses or sizeable profit reduction There is a distinct pattern with HSBC. The 4th quarter of the last few years has been especially dismal compared with other quarters. To be fair, some other banks have a similarly weak final quarter, but HSBC remains unique given its footprint, its management disarray and its fall from grace. The risk to an incredibly poor quarter appears amplified and we wonder if the temporary CEO will use this as an opportunity to try to start the year clean.

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<ul>
<li>HSBC NA loses money in every operating environment, making it a perfect hedge.</li>
<li>Credit quality and capital levels remain very weak. Re-cap is when not if. </li>
<li>Earnings management isn't lost on HSBC NA.</li>
<li> Overhead levels equate to operating revenues.</li>
<li> NIMs are at 81 bps - the first major US bank below 100 bps.  </li>
</ul>


HSBC NA loses money in every operating environment, making it a perfect hedge.
Credit quality and capital levels remain very weak. Re-cap is when not if. 
Earnings management isn't lost on HSBC NA.
 Overhead levels equate to operating revenues.
 NIMs are at 81 bps - the first major US bank below 100 bps.  


There should be no surprise at the dismal results for <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. The bank remains incredibly exposed to numerous risks, including by not limited to: weakening UK economy, poor scale and poor economy in US, trade and protest strains in HK operations, a continuing weak China, and well-known stresses in fringe markets, Turkey and Argentina. The bank's 24% decline in profit for common shareholders' YoY in 3Q19 is poor but to us, wholly understandable.

There should be no surprise at the dismal results for HSBC Holdings (5 HK). The bank remains incredibly exposed to numerous risks, including by not limited to: weakening UK economy, poor scale and poor economy in US, trade and protest strains in HK operations, a continuing weak China, and well-known stresses in fringe markets, Turkey and Argentina. The bank's 24% decline in profit for common shareholders' YoY in 3Q19 is poor but to us, wholly understandable. 

It’s another year. It’s another cost cutting. The admission seems wholly in character with what we have come to expect from <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> . “We’ve known for years that we need to do something about our cost base, the largest component of which is people – now we are finally grasping the nettle” reads a unnamed source from HSBC in the FT. It is unclear how something ‘known for years’ takes so long to enact? And still, there are poor signs with the bank’s track record here: HSBC has cut its staff numbers by 20% over the past 11 years, and yet its personnel costs are down just 12% over this time. It is not at all a one-for-one, on staff cutting and savings.

It’s another year. It’s another cost cutting. The admission seems wholly in character with what we have come to expect from HSBC Holdings (5 HK) . “We’ve known for years that we need to do something about our cost base, the largest component of which is people – now we are finally grasping the nettle” reads a unnamed source from HSBC in the FT. It is unclear how something ‘known for years’ takes so long to enact? And still, there are poor signs with the bank’s track record here: HSBC has cut its staff numbers by 20% over the past 11 years, and yet its personnel costs are down just 12% over this time. It is not at all a one-for-one, on staff cutting and savings. 

*Poor 2Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 2Q21 results of SGD 1.7 bn, decreasing SGD 304  mn (15.1%) on a linked quarter basis. The weaker results were driven primarily by an overall revenue decline, a loan provision increase, and a higher tax rate;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. By our calculation, and given the NCOs of SGD 69 mn, we find that net new NPLs have re-accelerated – up SGD 266 mn or increasing 18.0% annualized versus SGD 85 mn or 5.6% in 1Q21. We feel that reserves should be shored up in the neighborhood of SGD 2.5bn – amounting now to about two quarters of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

*Poor 2Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 2Q21 results of SGD 1.7 bn, decreasing SGD 304  mn (15.1%) on a linked quarter basis. The weaker results were driven primarily by an overall revenue decline, a loan provision increase, and a higher tax rate;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. By our calculation, and given the NCOs of SGD 69 mn, we find that net new NPLs have re-accelerated – up SGD 266 mn or increasing 18.0% annualized versus SGD 85 mn or 5.6% in 1Q21. We feel that reserves should be shored up in the neighborhood of SGD 2.5bn – amounting now to about two quarters of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

United Kingdom

HSBC Holdings plc is the holding company for the HSBC Group. The Company provides a variety of international banking and financial services, including retail and corporate banking, trade, trusteeship, securities, custody, capital markets, treasury, private and investment banking, and insurance. HSBC Holdings operates worldwide.

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HSBC Holdings (HSBC US)

HSBC – Kitchen Sink

The final quarter of 2016 was a loss for HSBC Holdings (5 HK). The final quarter of 2017 saw profit down 91% YoY. The final quarter of 2018 was far...

Daniel Tabbush

HSBC North America - The Perfect Hedge

HSBC NA loses money in every operating environment, making it a perfect hedge. Credit quality and capital levels remain very weak. Re-cap is when...

Thomas J. Monaco

HSBC – Granular Detail on Poor Results

There should be no surprise at the dismal results for HSBC Holdings (5 HK). The bank remains incredibly exposed to numerous risks, including by not...

Daniel Tabbush

HSBC – Cutting

It’s another year. It’s another cost cutting. The admission seems wholly in character with what we have come to expect from HSBC Holdings (5 HK) ....

Daniel Tabbush

DBS Group Holdings – Bad Print

DBS: DBS QOQ 2Q21 results declined 15.1% due to poor revenues and higher provisions. We worry that DBS has not caught the LVB risk, net new NPLs re...

Thomas J. Monaco

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