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.

Thematic (Sector/Industry)

During last year it was not about intrinsic economic or bank health. There was a filter applied to the analysis. With its removal now, we believe that inherent malaise for India corporates will become clear again.

During last year it was not about intrinsic economic or bank health. There was a filter applied to the analysis. With its removal now, we believe that inherent malaise for India corporates will become clear again.

India Financials

Saumya Agarwal

Indian Banks have built up huge ammunition of Covid related and contingent provisions even as the ‘Real’ NPA picture remains somewhat obscure due to multiple factors playing out such as Moratorium, the Supreme Court interim order and the Restructuring framework. How well placed are Indian Banks to ride the current stress cycle?

Indian Banks have built up huge ammunition of Covid related and contingent provisions even as the ‘Real’ NPA picture remains somewhat obscure due to multiple factors playing out such as Moratorium, the Supreme Court interim order and the Restructuring framework. How well placed are Indian Banks to ride the current stress cycle?

Indian Banks: How Well-Placed Are Indian Banks to Ride the Current Stress Cycle?

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

*Banks’ Insurance Investment Restrictions On The Way: Although not confirmed, the Reserve Bank of India (RBI) is contemplating limiting bank ownership in insurance companies to a maximum 20% stake. The RBI is apparently growing uncomfortable with the higher ownership in insurers due to their higher capital requirements.  Instead, the RBI would prefer that its constituent banks focus on their core business; and*RBI Has More Important Things To Concern Itself With: Given where we are in the credit cycle – with annualized net new NPL growth in many instances exceeding 100% and banks already insolvent, it would appear that the RBI has better things to concern itself over rather than a bank’s low absolute investment in insurance companies – investments which are posting positive results unlike most core businesses of the Indian commercial banks.

*Banks’ Insurance Investment Restrictions On The Way: Although not confirmed, the Reserve Bank of India (RBI) is contemplating limiting bank ownership in insurance companies to a maximum 20% stake. The RBI is apparently growing uncomfortable with the higher ownership in insurers due to their higher capital requirements.  Instead, the RBI would prefer that its constituent banks focus on their core business; and*RBI Has More Important Things To Concern Itself With: Given where we are in the credit cycle – with annualized net new NPL growth in many instances exceeding 100% and banks already insolvent, it would appear that the RBI has better things to concern itself over rather than a bank’s low absolute investment in insurance companies – investments which are posting positive results unlike most core businesses of the Indian commercial banks.  

Reserve Bank of India – Idle Hands Are The Devil’s Workshop

Equity Bottom-Up

Edelweiss Financial Services / Equity Bottom-Up

*Negative Operating Performance: Edelweiss Financial Services (EDEL.IN) [Edelweiss] reported yet another consolidated loss of INR 630.0 mn (post minority interest) for FY 3Q21 – declining INR 69.0 mn (12.3%) linked quarter. Excluding the gain on sale of securities, Edelweiss’ core operating results were actually frightening at a loss of INR 4.9 bn – down a further INR 106 mn (2.2%) over the same period. Nothing appears to be going right for Edelweiss, with management now beginning to discuss liquidity metrics; and *Wheels Falling Off The Bus: We are significantly troubled by the enormity of the breakdown in credit, as net new NPLs, by our calculation, increased INR 2.7 bn linked quarter for an annualized rate of growth of 106% - far and away the worst showing of any Indian financial under our coverage. Given the net new NPL increase, we find that loss reserves are light to tune of INR 15.7 bn or 2.3x stated equity of INR 6.9 bn at FY 3Q21.  Negative operating losses coupled with potentially challenged liquidity, and the poor credit cushion could invite regulatory intervention.

*Negative Operating Performance: Edelweiss Financial Services (EDEL.IN) [Edelweiss] reported yet another consolidated loss of INR 630.0 mn (post minority interest) for FY 3Q21 – declining INR 69.0 mn (12.3%) linked quarter. Excluding the gain on sale of securities, Edelweiss’ core operating results were actually frightening at a loss of INR 4.9 bn – down a further INR 106 mn (2.2%) over the same period. Nothing appears to be going right for Edelweiss, with management now beginning to discuss liquidity metrics; and *Wheels Falling Off The Bus: We are significantly troubled by the enormity of the breakdown in credit, as net new NPLs, by our calculation, increased INR 2.7 bn linked quarter for an annualized rate of growth of 106% - far and away the worst showing of any Indian financial under our coverage. Given the net new NPL increase, we find that loss reserves are light to tune of INR 15.7 bn or 2.3x stated equity of INR 6.9 bn at FY 3Q21.  Negative operating losses coupled with potentially challenged liquidity, and the poor credit cushion could invite regulatory intervention. 

Edelweiss Financial Services – The Whole Package

Indiabulls Housing Finance / Equity Bottom-Up

*Quality Quarter: IndiaBulls Housing Finance (IHFL.IN) [IndiaBulls] reported FY 3Q21 results of INR 5.5 bn, increasing INR 2.3 bn (70.7%) linked quarter. Much of the linked quarter improvement can be attributed to net interest income growth resultant of strong loan growth and NIM improvement. Other reasons for the outperformance included both an increase in loan assignment income; adecline in loss provisions; and a decrease in its tax rate; and  *Credit Improving: While the stated NPL figure was higher, we note that due the recovery of INR 3.4 bn that net new NPLs had actually declined INR 572 mn for the quarter for an annualized rate of decline of 11.3% - which is in complete contravention to the Indian financial sector to date. Reserves would appear in-line with risk on and off balance for IndiaBulls – a welcome contradiction to the awful reserve cover at nearly every other Indian financial institution.

*Quality Quarter: IndiaBulls Housing Finance (IHFL.IN) [IndiaBulls] reported FY 3Q21 results of INR 5.5 bn, increasing INR 2.3 bn (70.7%) linked quarter. Much of the linked quarter improvement can be attributed to net interest income growth resultant of strong loan growth and NIM improvement. Other reasons for the outperformance included both an increase in loan assignment income; adecline in loss provisions; and a decrease in its tax rate; and  *Credit Improving: While the stated NPL figure was higher, we note that due the recovery of INR 3.4 bn that net new NPLs had actually declined INR 572 mn for the quarter for an annualized rate of decline of 11.3% - which is in complete contravention to the Indian financial sector to date. Reserves would appear in-line with risk on and off balance for IndiaBulls – a welcome contradiction to the awful reserve cover at nearly every other Indian financial institution. 

IndiaBulls Housing Finance – Sunny Disposition

India

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.

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Punjab National Bank (PNB IN)

India Banks – Remove The Filter

India's banks are not seeing a major decline in provisions like others. We wonder if inherent India corporate risk is now coming through more...

Daniel Tabbush

Indian Banks: How Well-Placed Are Indian Banks to Ride the Current Stress Cycle?

Indian Banks have built up huge ammunition of Covid related and contingent provisions even as the ‘Real’ NPA picture remains somewhat obscure . Can...

Saumya Agarwal

Reserve Bank of India – Idle Hands Are The Devil’s Workshop

RESERVE BANK OF INDIA: The RBI is contemplating limiting bank ownership in insurance companies to a maximum 20%. Given where we are in the credit...

Thomas J. Monaco

Edelweiss Financial Services – The Whole Package

EDELWEISS FINANCIAL SERVICES: Edelweiss reported another loss. We are troubled by the enormity of the breakdown in credit, light loss reserves at...

Thomas J. Monaco

IndiaBulls Housing Finance – Sunny Disposition

INDIABULLS HOUSING FINANCE: IndiaBulls reported a FY 3Q21 linked quarter result increase of 70.7%. Net new NPLs declined at an annualized rate of...

Thomas J. Monaco

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