Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/confluent-inc" target="_blank" data-smartkarma-citation="entities:33443:1" rel="noopener">Confluent (CFLT US)</a>  is an American-based data infrastructure software company and a major contributor to the open-source project Apache Kafka. </li>
<li>Original creators of Apache Kafka founded the company in 2014. Today, Kafka has 5M+ lifetime downloads, and &gt;100,000 organizations use the successful open source project.</li>
<li>We believe <a href="https://www.smartkarma.com/entities/confluent-inc" target="_blank" data-smartkarma-citation="entities:33443:1" rel="noopener">Confluent (CFLT US)</a>  is uniquely positioned to benefit from the widespread adoption of Apache Kafka and the growing $50B+ total addressable market. </li>
</ul>



Confluent (CFLT US)  is an American-based data infrastructure software company and a major contributor to the open-source project Apache Kafka. 
Original creators of Apache Kafka founded the company in 2014. Today, Kafka has 5M+ lifetime downloads, and &gt;100,000 organizations use the successful open source project.
We believe Confluent (CFLT US)  is uniquely positioned to benefit from the widespread adoption of Apache Kafka and the growing $50B+ total addressable market. 


Confluent: Harnessing Data In Motion. Initiate At Overweight

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>
Horta-Osorio Is Out:Credit Suisse Group (CSGN.VX) (“Credit Suisse”) Chairman Antonio Horta-Osório abruptly resigned on January 16, 2022, following breaches of quarantine rules in both Switzerland and the United Kingdom;</li>
<li>
Lehmann Not Lehman:With CEO Gottstein’s alleged resistance to strategic change, we remain cautious that the current strategic direction of Credit Suisse will not be maintained;  and   </li>
<li>
Blunders Could Force Sale:There have been numerous costly high profile blunders at Credit Suisse in 2021. A reversion to the “Bad Old Days” could force a sale.   </li>
</ul>



Horta-Osorio Is Out:Credit Suisse Group (CSGN.VX) (“Credit Suisse”) Chairman Antonio Horta-Osório abruptly resigned on January 16, 2022, following breaches of quarantine rules in both Switzerland and the United Kingdom;

Lehmann Not Lehman:With CEO Gottstein’s alleged resistance to strategic change, we remain cautious that the current strategic direction of Credit Suisse will not be maintained;  and   

Blunders Could Force Sale:There have been numerous costly high profile blunders at Credit Suisse in 2021. A reversion to the “Bad Old Days” could force a sale.   


Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

Loan data for August 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for all Japanese commercial banks is now in negative territory, driven by a sharp YoY decline in lending by the major banks over the last four months.  Even on a month-on-month basis, total lending by Japanese banks has been falling for four out of the last five months.  Credit lines that were drawn down in 2020 as Japan went into nationwide COVID-induced lockdown, but were ultimately largely unneeded, are now being repaid.Interest rates remain at rock bottom, a fact that helps minimize funding costs, while the recovery in the stock market has given the banks some valuable ‘breathing space’ to offset rising credit costs with gains on selling some of the investment portfolio.  Nevertheless, margins remain under intense pressure, pushing core earnings down.  The quality of bank profits therefore continues to deteriorate, even though bottom-line profits for 1H FY3/2022 are likely to exceed most banks’ cautious initial earnings guidance.  That said, we expect few banks to opt to raise their full-year guidance significantly, regardless of 1H FY3/2022 results (due out mid-November).The Japanese banking sector in 2021 has outperformed Topix for the first time in several years, aided by a weakening Yen against the US$.  Yet, as we head into the third quarter of FY3/2022, much of the earlier outperformance by the banking sector against Topix has already been given back.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/501/original/8300-WR-JBanks-2021-0719-TooLow4Zero-TPNBNKvsTPX+2015-2021.jpg?1632884040" class="editor-image img-responsive" data-smartkarma-image-id="232501"></figure></section>

Loan data for August 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for all Japanese commercial banks is now in negative territory, driven by a sharp YoY decline in lending by the major banks over the last four months.  Even on a month-on-month basis, total lending by Japanese banks has been falling for four out of the last five months.  Credit lines that were drawn down in 2020 as Japan went into nationwide COVID-induced lockdown, but were ultimately largely unneeded, are now being repaid.Interest rates remain at rock bottom, a fact that helps minimize funding costs, while the recovery in the stock market has given the banks some valuable ‘breathing space’ to offset rising credit costs with gains on selling some of the investment portfolio.  Nevertheless, margins remain under intense pressure, pushing core earnings down.  The quality of bank profits therefore continues to deteriorate, even though bottom-line profits for 1H FY3/2022 are likely to exceed most banks’ cautious initial earnings guidance.  That said, we expect few banks to opt to raise their full-year guidance significantly, regardless of 1H FY3/2022 results (due out mid-November).The Japanese banking sector in 2021 has outperformed Topix for the first time in several years, aided by a weakening Yen against the US$.  Yet, as we head into the third quarter of FY3/2022, much of the earlier outperformance by the banking sector against Topix has already been given back.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Japanese Bank Lending:  Too Low For Zero

Mitsubishi UFJ Financial (MUFG) / Equity Bottom-Up

*USB Pounces Quickly: US Bancorp (USB.US) announced the acquisition of MUFG’s West Coast regional bank (Union Bank) for USD 8.0 bn in a 70/30 cash/stock transaction. Admittedly, this transaction is smaller than we had anticipated – only being Union Bank, the largest portion of MUFG Americas, MUFG’s US bank holding company; and  *Headache Relieved: MUFG recently received a regulatory C&amp;D for "unsafe and unsound practices" with respect to operational risk management and non-compliance with security standards. USB is now the responsible party. MUFG receives USD 5.5 bn in cash and a 2.9% stake in USB, and likely will record a gain of JPY 150 bn. At MUFG Americas, approximately USD 22.6 bn in assets remains at the CIB.

*USB Pounces Quickly: US Bancorp (USB.US) announced the acquisition of MUFG’s West Coast regional bank (Union Bank) for USD 8.0 bn in a 70/30 cash/stock transaction. Admittedly, this transaction is smaller than we had anticipated – only being Union Bank, the largest portion of MUFG Americas, MUFG’s US bank holding company; and  *Headache Relieved: MUFG recently received a regulatory C&amp;D for "unsafe and unsound practices" with respect to operational risk management and non-compliance with security standards. USB is now the responsible party. MUFG receives USD 5.5 bn in cash and a 2.9% stake in USB, and likely will record a gain of JPY 150 bn. At MUFG Americas, approximately USD 22.6 bn in assets remains at the CIB. 

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

<h2>Headline Developments</h2>Steam, the video game distribution platform owned by Valve (private) , has released the long-rumoured handheld gaming device the Steam Deck; available from December (although big delays are expected with the premium $649 512GB version not available until 3Q22!).

Headline DevelopmentsSteam, the video game distribution platform owned by Valve (private) , has released the long-rumoured handheld gaming device the Steam Deck; available from December (although big delays are expected with the premium $649 512GB version not available until 3Q22!).

United States

Morgan Stanley, a bank holding company, provides diversified financial services on a worldwide basis.  The Company operates a global securities business which serves individual and institutional investors and investment banking clients. Morgan Stanley also operates a global asset management business.

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Morgan Stanley (MS US)

Confluent: Harnessing Data In Motion. Initiate At Overweight

We are initiating coverage on Confluent with an Overweight rating and price target of $28, implying a ~50% upside. Fundamentals remain attractive,...

Andrei Zakharov

Credit Suisse Group – Lehmann Moment

CREDIT SUISSE: Credit Suisse Chairman Horta-Osório resigned following breaches of quarantine. With the CEO’s resistance to strategic change, we are...

Thomas J. Monaco

Japanese Bank Lending: Too Low For Zero

Data for August 2021 from both the JBA and the BoJ confirm that YoY loan growth for all Japanese commercial banks has turned negative, driven by a...

J. Brian Waterhouse

Mitsubishi UFJ Financial – Sayonara

MUFG: US Bancorp announced the acquisition of MUFG’s West Coast Union Bank for USD 8.0 bn. MUFG recently received a regulatory C&D for "unsafe and...

Thomas J. Monaco

Weekly Innovation Review (WIRE) #41

Headline Developments: Steam , the video game distribution platform owned by Valve (private), has released the long-rumoured handheld gaming device...

Granite Bay Capital

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