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

*Gross Operating Revenues Do NOT Cover Recurring Costs At HSBCNA: HSBC Holdings plc’s (HSBC) [5.HK/HSBA.LN] US subsidiary, HSBC North America (US only) [HSBCNA], reported yet another troubling set of results for 4Q20, losing USD 152.6 mn – down USD 312.6 mn (195.4%) on a linked quarter basis. Excluding non-recurring items, core operating income declined USD 313.6 mn (230.1%) for a loss of USD 177.3 mn over the same period. As it stands again, HSBCNA’s operating costs exceed recurring revenues; *HSBCNA Is Evolving Into An Indian State Bank: Given the credit weakness, we find that NPL/TL and problem assets/TL ratios significantly worsened 92 bp and 160 bp linked quarter, respectively, to 2.82% and 5.01%. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis; and*HSBCNA Should Be Dumped At Any Price: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. We look forward to Group results on February 23rd, and the clarity we will receive on its hot mess in the US.

*Gross Operating Revenues Do NOT Cover Recurring Costs At HSBCNA: HSBC Holdings plc’s (HSBC) [5.HK/HSBA.LN] US subsidiary, HSBC North America (US only) [HSBCNA], reported yet another troubling set of results for 4Q20, losing USD 152.6 mn – down USD 312.6 mn (195.4%) on a linked quarter basis. Excluding non-recurring items, core operating income declined USD 313.6 mn (230.1%) for a loss of USD 177.3 mn over the same period. As it stands again, HSBCNA’s operating costs exceed recurring revenues; *HSBCNA Is Evolving Into An Indian State Bank: Given the credit weakness, we find that NPL/TL and problem assets/TL ratios significantly worsened 92 bp and 160 bp linked quarter, respectively, to 2.82% and 5.01%. By our calculation, we note that net new problem loan growth is a scary USD 867.9 mn  - for an annualized rate of growth of 155.4% - in line with the Indian state banks. By our calculation, HSBCNA’s reserves are light by USD 3.8 bn or 17.6% of HSBCNA’s stated equity. We would have compared the reserve shortfall to PBT, but HSBCNA simply loses money on an operating basis; and*HSBCNA Should Be Dumped At Any Price: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. We look forward to Group results on February 23rd, and the clarity we will receive on its hot mess in the US.     

HSBC Holdings Plc –American Result Intimates Group Miss

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)

We are especially concerned with subprime loans. Many people turn to subprime loans, as they have poor credit history, low FICO scores, limited income, low paying jobs, which may be seasonal, temporary. These people will be hard hit in the shutdown, may even escape some of the macro statistics, especially where not legal residents, workers. But defaults on subprime loans will not escape the lenders. <a href="https://www.smartkarma.com/entities/santander-consumer-usa-holdings-inc" target="_blank" data-smartkarma-citation="entities:9220:1" rel="noopener">Santander Consumer USA (SC US)</a>, <a href="https://www.smartkarma.com/entities/world-acceptance-corp" target="_blank" data-smartkarma-citation="entities:8020:1" rel="noopener">World Acceptance (WRLD US)</a>, <a href="https://www.smartkarma.com/entities/ally-financial-inc" target="_blank" data-smartkarma-citation="entities:9683:1" rel="noopener">Ally Financial (ALLY US)</a> are a few companies that stand out. We already know how credit costs can appear from at least two large commercial banks with figures out last night, and we must expect greater deterioration with subprime lenders.

We are especially concerned with subprime loans. Many people turn to subprime loans, as they have poor credit history, low FICO scores, limited income, low paying jobs, which may be seasonal, temporary. These people will be hard hit in the shutdown, may even escape some of the macro statistics, especially where not legal residents, workers. But defaults on subprime loans will not escape the lenders. Santander Consumer USA (SC US), World Acceptance (WRLD US), Ally Financial (ALLY US) are a few companies that stand out. We already know how credit costs can appear from at least two large commercial banks with figures out last night, and we must expect greater deterioration with subprime lenders. 

Santander Consumer USA / Equity Bottom-Up

Typically high yield subprime lending leads to high returns. This is hardly the case for <a href="https://www.smartkarma.com/entities/santander-consumer-usa-holdings-inc" target="_blank" data-smartkarma-citation="entities:9220:1" rel="noopener">Santander Consumer USA Holdings (SC US)</a>. And its worsening. Where credit costs have been fairly flat in recent quarters, worsening credit metrics can weigh heavily on profit, given already weak net interest income and high operating costs. SC operates in the US, where banks outside the largest 100 are showing credit card delinquency rates higher than in the Global Financial Crisis (GFC). New data shows manufacturing monthly contraction at the highest rate since the GFC.  S&amp;P Global Ratings shows that global corporate defaults are up to the second highest level since GFC, and where the US had the highest number of defaults overall. FDIC data shows four US bank bankruptcies during 2019, compared with none in 2018.  The backdrop of SC is not one that is marginally positive for coming quarters.

Typically high yield subprime lending leads to high returns. This is hardly the case for Santander Consumer USA Holdings (SC US). And its worsening. Where credit costs have been fairly flat in recent quarters, worsening credit metrics can weigh heavily on profit, given already weak net interest income and high operating costs. SC operates in the US, where banks outside the largest 100 are showing credit card delinquency rates higher than in the Global Financial Crisis (GFC). New data shows manufacturing monthly contraction at the highest rate since the GFC.  S&amp;P Global Ratings shows that global corporate defaults are up to the second highest level since GFC, and where the US had the highest number of defaults overall. FDIC data shows four US bank bankruptcies during 2019, compared with none in 2018.  The backdrop of SC is not one that is marginally positive for coming quarters.  

Santander Consumer – Subprime Lending Deterioration

Nearly half of all reporting US banks and specialty lenders, reported a decline in profit from 3Q18 to 4Q18. Of the 68 companies with populated data in our S&amp;P CIQ database, 30 companies show profit down QoQ. The average decline is 17% QoQ, with <a href="https://www.smartkarma.com/entities/1018" target="_blank" data-smartkarma-citation="entities:1018:1">Bank Of New York Mellon (BK US)</a>, <a href="https://www.smartkarma.com/entities/277" target="_blank" data-smartkarma-citation="entities:277:1">JPMorgan Chase &amp; Co (JPM US)</a>, and <a href="https://www.smartkarma.com/entities/279" target="_blank" data-smartkarma-citation="entities:279:1">Citigroup Inc (C US)</a> included in this group.

Nearly half of all reporting US banks and specialty lenders, reported a decline in profit from 3Q18 to 4Q18. Of the 68 companies with populated data in our S&amp;P CIQ database, 30 companies show profit down QoQ. The average decline is 17% QoQ, with Bank Of New York Mellon (BK US), JPMorgan Chase &amp; Co (JPM US), and Citigroup Inc (C US) included in this group.

Public Relations and Social Media Manager, Dechert LLP

Peggy Heffner

Public Relations and Social Media Manager

Dechert is a global specialist law firm

Dechert LLP

Dechert is a global specialist law firm.
Focused on sectors with the greatest complexities, legal intricacies and highest regulatory demands, we excel in delivering practical commercial judgment and deep legal expertise for high-stakes matters.

Our work is widely recognized. We have 20 standout practices noted by Chambers Global, including global-wide rankings for arbitration, corporate investigations, anti-corruption, investment funds and life sciences. Named Antitrust Team of the Year, Chambers USA commends our “accomplished group” as “routinely sought after to handle some of the most significant litigation and transactions in the antitrust world.” 

In an increasingly challenging environment, clients look to us to serve them in ways that are faster, sharper and leaner without compromising excellence. We developed a first-of-its kind legal project management department, which uses technology, people and processes to drive efficiency and deliver value for our clients.

We are innovators. Dechert ranked #7 in the Financial Times’ Top North American Innovative Law Firms. Financial Times also recognizes us among the Top European Innovative Law Firms and highly commends World Compass, our marketing compliance service, which offers investment firms advice in more than 100 jurisdictions.

<ul><li>The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last six years.</li><li>It remains to be seen what plans the incoming administration will bring to this area.</li><li>However, new regulatory proposals and other developments continue to present a complicated regulatory climate for banks and other large financial institutions.</li></ul>

The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last six years.It remains to be seen what plans the incoming administration will bring to this area.However, new regulatory proposals and other developments continue to present a complicated regulatory climate for banks and other large financial institutions.

The New Future of US Banking and Financial Services Regulation

United States

Santander Consumer USA Holdings Inc. provides automotive loans. The Company offers new car loans, used car loans, automobile refinance and cash back refinance services.

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Santander Consumer USA (SC US)

HSBC Holdings Plc –American Result Intimates Group Miss

HSBC HOLDINGS PLC: HSBCNA reported troubling results in 4Q20 - declining 195% linked quarter, as operating costs exceed recurring revenues. This...

Thomas J. Monaco

US Banks – Beware of Subprime, Again

We are especially concerned with subprime loans. Many people turn to subprime loans, as they have poor credit history, low FICO scores, limited...

Daniel Tabbush

Santander Consumer – Subprime Lending Deterioration

Typically high yield subprime lending leads to high returns. This is hardly the case for Santander Consumer USA Holdings (SC US). And its...

Daniel Tabbush

US Banks - Declining Profit

Nearly half of all reporting US banks and specialty lenders, reported a decline in profit from 3Q18 to 4Q18. Of the 68 companies with populated...

Daniel Tabbush

The New Future of US Banking and Financial Services Regulation

The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last...

Dechert LLP

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