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

Equity Bottom-Up

<ul>
<li>Another Troubled Bank Deal In Asia Adds Another Managerial Distraction;   </li>
<li>DBS Agreed to Acquire Citigroup’s Taiwan Consumer Franchise for SGD 2.9 bn After Three Taiwan Banks Couldn’t Make This Deal Work; and </li>
<li>In Addition, DBS’ Fundamentals Continue to Weaken, With Lower Fees, Compressed Margins, and Modestly Weaker Credit. </li>
</ul>


Another Troubled Bank Deal In Asia Adds Another Managerial Distraction;   
DBS Agreed to Acquire Citigroup’s Taiwan Consumer Franchise for SGD 2.9 bn After Three Taiwan Banks Couldn’t Make This Deal Work; and 
In Addition, DBS’ Fundamentals Continue to Weaken, With Lower Fees, Compressed Margins, and Modestly Weaker Credit. 


DBS Group Holdings – And Baby Makes Three

* Earnings Under Pressure: Chailease Holding (5871.TT) [Chailease] reported 1Q20 bottom-line profit of TWD 3.9n – declining TWD 63.5 mn (1.6%) linked quarter. However, when we exclude non-core items we find that Chailease results actually declined TWD 301.5 mn or 7.9% during the period. Expectedly driving the weaker 1Q20 result, we find that loans loss provisions increased TWD 449.8 mn (37.1%)  - offset largely by net interest income which improved TWD 194.4 mn (2.5%) and other expenses which declined TWD 165.2 mn (14.7%);* Credit Risk Increasing, and Under-reserving: By our calculation, Chailease delinquencies increased TWD 1.6 bn (15.2%) linked quarter, and amount to 2.98% of total loans (up 38 bp linked quarter). . On an aggregate portfolio basis, we note that net new delinquencies amounted to approximately TWD 2.9 bn - increasing at a bewildering annualized clip of 110%.  Provided Chailease maintained delinquency cover at 4Q19’s level, earnings should have been lower by TWD 1.2 bn or 34%. The bulk of the flawed reserve policy is centered in (what a shock) mainland China where the loan loss reserve was flat on an absolute basis  - yet declined from 135% to 109% on a delinquency basis as both NCOs and delinquencies increased 36.5% and 25.4%, respectively; and *Preferred Debt Issuance: Chailease also guided a potential preferred share issuance worth around TWD 10 bn.

* Earnings Under Pressure: Chailease Holding (5871.TT) [Chailease] reported 1Q20 bottom-line profit of TWD 3.9n – declining TWD 63.5 mn (1.6%) linked quarter. However, when we exclude non-core items we find that Chailease results actually declined TWD 301.5 mn or 7.9% during the period. Expectedly driving the weaker 1Q20 result, we find that loans loss provisions increased TWD 449.8 mn (37.1%)  - offset largely by net interest income which improved TWD 194.4 mn (2.5%) and other expenses which declined TWD 165.2 mn (14.7%);* Credit Risk Increasing, and Under-reserving: By our calculation, Chailease delinquencies increased TWD 1.6 bn (15.2%) linked quarter, and amount to 2.98% of total loans (up 38 bp linked quarter). . On an aggregate portfolio basis, we note that net new delinquencies amounted to approximately TWD 2.9 bn - increasing at a bewildering annualized clip of 110%.  Provided Chailease maintained delinquency cover at 4Q19’s level, earnings should have been lower by TWD 1.2 bn or 34%. The bulk of the flawed reserve policy is centered in (what a shock) mainland China where the loan loss reserve was flat on an absolute basis  - yet declined from 135% to 109% on a delinquency basis as both NCOs and delinquencies increased 36.5% and 25.4%, respectively; and *Preferred Debt Issuance: Chailease also guided a potential preferred share issuance worth around TWD 10 bn.

Chailease Holding – Delayed Reaction By ASEAN Should Weigh Heavily On Results Too

United Kingdom

iShares MSCI Taiwan UCITS ETF USD (Dist) is an open-end, UCITS compliant exchange traded fund incorporated in Ireland.  The Fund aims to track the performance of the MSCI Taiwan Index. The fund distributes income received to shareholders.

iShares MSCI Taiwan UCITS ETF (ITWN LN)

DBS Group Holdings – And Baby Makes Three

DBS: Another troubled bank deal adds another managerial distraction, as DBS has agreed to acquire Citigroup’s Taiwan consumer franchise. Further,...

Thomas J. Monaco

Chailease Holding – Delayed Reaction By ASEAN Should Weigh Heavily On Results Too

* Earnings Under Pressure: Chailease Holding (5871.TT) [Chailease] reported 1Q20 bottom-line profit of TWD 3.9n – declining TWD 63.5 mn (1.6%)...

Thomas J. Monaco