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/seven-bank-ltd" target="_blank" data-smartkarma-citation="entities:16063:1" rel="noopener">Seven Bank Ltd (8410 JP)</a> is the 7-11 convenience store bank, which focuses on ATM fees more than loans, so its cash is JPY952bn vs loans JPY35bn at FY23.</li>
<li>Loan growth in 1Q24 is 7% YoY, one of strongest in Japan and it is accelerating in recent periods, alongside 8-9% growth in ATM transactions, retail accounts</li>
<li>Exceptionally strong ATM transactions abroad at 92.4m in 1Q24 vs 66.5m in 1Q23, including US, Indonesia and Philippines. </li>
</ul>



Seven Bank Ltd (8410 JP) is the 7-11 convenience store bank, which focuses on ATM fees more than loans, so its cash is JPY952bn vs loans JPY35bn at FY23.
Loan growth in 1Q24 is 7% YoY, one of strongest in Japan and it is accelerating in recent periods, alongside 8-9% growth in ATM transactions, retail accounts
Exceptionally strong ATM transactions abroad at 92.4m in 1Q24 vs 66.5m in 1Q23, including US, Indonesia and Philippines. 


Seven Bank - Assets 39x Loans | Strong 7% Loan Growth | ATM Transactions +8% | Retail Accounts +9%

Product Marketing Manager, Criat

Raghav Chandra Mathur

Product Marketing Manager

Next-Generation Credit Analytics Provider

Criat

Criat specializes in new-generation data-driven credit analytics. Leveraging our industry-leading DeepCredit analytical technologies, we produce daily-updated forward-looking credit assessment and valuation to help financial institutions stay ahead of risks. Coupled with use-case-driven applications, we extract insights, answer questions and enable smarter credit decisions.

Thematic (Sector/Industry)

<ul><li>Despite rising expectations by global markets that were awaiting a signal towards normalizing monetary policy by the Bank of Japan (BoJ), in September, the BoJ decided to leave its ultra- loose interest rates unchanged in spite of domestic consumer prices rising faster than the central bank’s 2% mandate.</li><li>The central bank’s decision to not tighten credit conditions, especially given the differential between BoJ’s policy rate and that of the US Federal Reserve’s (Fed) widening, led to the JPY tumbling against the USD to a 10-month low of JPY 148.46/USD.</li><li>Such domestic headwinds continue to put pressure on Japanese banks’ credit profiles which have been plagued by low domestic interest rate margins and fallout from decades of weak economic growth.</li></ul>

Despite rising expectations by global markets that were awaiting a signal towards normalizing monetary policy by the Bank of Japan (BoJ), in September, the BoJ decided to leave its ultra- loose interest rates unchanged in spite of domestic consumer prices rising faster than the central bank’s 2% mandate.The central bank’s decision to not tighten credit conditions, especially given the differential between BoJ’s policy rate and that of the US Federal Reserve’s (Fed) widening, led to the JPY tumbling against the USD to a 10-month low of JPY 148.46/USD.Such domestic headwinds continue to put pressure on Japanese banks’ credit profiles which have been plagued by low domestic interest rate margins and fallout from decades of weak economic growth.

Change of Fortunes Result in Japanese Megabanks’ Leading Road to Recovery

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sbi-sumishin-net-bank" target="_blank" data-smartkarma-citation="entities:34572:1" rel="noopener">SBI Sumishin Net Bank (7163 JP)</a> raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.</li>
<li>SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.</li>
<li>In this note, we will talk about the lock-up dynamics and updates since our last note.</li>
</ul>



SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.
SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
In this note, we will talk about the lock-up dynamics and updates since our last note.


SBI Sumishin Net Bank IPO Lock-Up - A US$1bn Lockup Release, Will Sell a Little at Some Point

Sumitomo Mitsui Financial Group / Equity Bottom-Up

<ul>
<li>SMFG can benefit like peer banks from BOJ policy change, but less so than MUFG, while at the same time, there does not appear to be a strong alpha story</li>
<li>ROE and ROA for SMFG show now expansion over the years, and this is stark contrast to MUFG, part of this appears to be due many weak subsidiaries</li>
<li>Credit costs are now averaging 23bps over the past four quarters vs 13bps during 1Q18 to 4Q19, not improving credit metrics like many others, with high write-offs.</li>
</ul>


SMFG can benefit like peer banks from BOJ policy change, but less so than MUFG, while at the same time, there does not appear to be a strong alpha story
ROE and ROA for SMFG show now expansion over the years, and this is stark contrast to MUFG, part of this appears to be due many weak subsidiaries
Credit costs are now averaging 23bps over the past four quarters vs 13bps during 1Q18 to 4Q19, not improving credit metrics like many others, with high write-offs.


SMFG (8316) - 75% Less JGBs than MUFG | Affiliates Show Worsening Profit | Credit Costs ~2x Vs Past

Mitsubishi UFJ Financial (MUFG) / Equity Bottom-Up

<ul>
<li>The biggest Japan banks by assets, in spotlight as near ending of negative interest rates, with lowest LDR, so highest bonds, cash, can see major benefit from YCC relief</li>
<li>Years of low ROE at 5-7% seem behind MUFG now with 12-17% in past two quarters, where leverage is not out of control, with cost improvements key</li>
<li>Loss loans down 29% over past two years, can support low credit costs, which dropped sharply from 81bps to 15bps from 3Q23 to 1Q24, possibly moving to reversals</li>
</ul>


The biggest Japan banks by assets, in spotlight as near ending of negative interest rates, with lowest LDR, so highest bonds, cash, can see major benefit from YCC relief
Years of low ROE at 5-7% seem behind MUFG now with 12-17% in past two quarters, where leverage is not out of control, with cost improvements key
Loss loans down 29% over past two years, can support low credit costs, which dropped sharply from 81bps to 15bps from 3Q23 to 1Q24, possibly moving to reversals


MUFG (8306) - Biggest JPN Bank, Lowest LDR at 48%: Most Bonds | ROE Surge to 12% May Be Sustainable

Japan

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.

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Mizuho Financial Group (8411 JP)

Seven Bank - Assets 39x Loans | Strong 7% Loan Growth | ATM Transactions +8% | Retail Accounts +9%

Highly geared toward change in negative rates on BOJ deposits. Good growth in ATMs outstanding, ATM transactions (especially overseas), and in...

Daniel Tabbush

Change of Fortunes Result in Japanese Megabanks’ Leading Road to Recovery

Despite rising expectations by global markets that were awaiting a signal towards normalizing monetary policy by the Bank of Japan (BoJ), in...

Criat

SBI Sumishin Net Bank IPO Lock-Up - A US$1bn Lockup Release, Will Sell a Little at Some Point

SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.

Sumeet Singh

SMFG (8316) - 75% Less JGBs than MUFG | Affiliates Show Worsening Profit | Credit Costs ~2x Vs Past

SMFG appears less leveraged to BOJ policy changes than MUFG, especially with ~75% less JGBs. It appears a less interesting alpha story; profit...

Daniel Tabbush

MUFG (8306) - Biggest JPN Bank, Lowest LDR at 48%: Most Bonds | ROE Surge to 12% May Be Sustainable

With a view on YCC relief, no more negative interest rates, MUFG is one to focus on: largest bank in Japan by assets, mkt cap, low 48% LDR - lower...

Daniel Tabbush

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