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)

Many of Asia’s banks have high levels of fixed deposits, and as these mature, they will re-price at lower rates. The scope for margin expansion is considerable. Vietnam’s banks stand out here, as does AMMB and Tisco.

Many of Asia’s banks have high levels of fixed deposits, and as these mature, they will re-price at lower rates. The scope for margin expansion is considerable. Vietnam’s banks stand out here, as does AMMB and Tisco. 

Asian Banks – Funding Costs Can Surprise

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

*Another Poor Showing: Hang Seng Bank (11.HK) [Hang Seng] reported a 1H21 result of HKD 8.8 bn, improving HKD 1.2 bn (16.3%) HOH. However, core operating results improved only nominally by HKD 52 mn or 0.8% over the period. Were it not for the unreasonable decline of HKD 639 mn (65.3%) in loss provisions as credit deteriorated, results would have been far worse;  and*Provisions Now Significantly Understated: While the current NPL ratio is not alarming on its face, the HOH increase in net new NPLs is HKD 1.7 bn or 23.5% annualized - decelerating from the HKD 3.0 bn or 201% annualized at 2H20. We find Hang Seng under-provided for to the tune of HKD 10.6 bn or nearly 1.5x the bank’s core operating result.

*Another Poor Showing: Hang Seng Bank (11.HK) [Hang Seng] reported a 1H21 result of HKD 8.8 bn, improving HKD 1.2 bn (16.3%) HOH. However, core operating results improved only nominally by HKD 52 mn or 0.8% over the period. Were it not for the unreasonable decline of HKD 639 mn (65.3%) in loss provisions as credit deteriorated, results would have been far worse;  and*Provisions Now Significantly Understated: While the current NPL ratio is not alarming on its face, the HOH increase in net new NPLs is HKD 1.7 bn or 23.5% annualized - decelerating from the HKD 3.0 bn or 201% annualized at 2H20. We find Hang Seng under-provided for to the tune of HKD 10.6 bn or nearly 1.5x the bank’s core operating result.

Hang Seng Bank – Wuihfung Remains In Full Control

With full data out from Singapore’s banks, it is becoming even clearer, how loan mix can impact net interest income, and margins. It is also a stark reminder of the inherent relative weakness at HSBC.

With full data out from Singapore’s banks, it is becoming even clearer, how loan mix can impact net interest income, and margins. It is also a stark reminder of the inherent relative weakness at HSBC.

*Kick In The Pants: On July 21, 2021, HSBC Holdings plc (5.HK/HSBA.LN) [HSBC] and many of the other major Hong Banks finally had the epiphany of declining mortgages to borrowers on two of Evergrande Group’s (3333.HK) residential developments in Hong Kong. On July 22, 2021, the Hong Kong Monetary Authority (HKMA) hauled HSBC and its colleagues in to explain the no lend decision on Evergrande’s two Hong Kong in process property  developments. Wouldn’t you know it, this subtle re-think request caused the banks to reverse course; and*Daisy Chain:This move by the HKMA and clearly prompted by authorities in mainland China intimates that Evergrande poses significant systemic risk for mainland China. Government officials in Shenyang are prompting SOEs to increase their ownership in Shengjing Bank (2966.HK), which is 36% owned by Evergrande and lent it an estimated USD 15.5 bn.

*Kick In The Pants: On July 21, 2021, HSBC Holdings plc (5.HK/HSBA.LN) [HSBC] and many of the other major Hong Banks finally had the epiphany of declining mortgages to borrowers on two of Evergrande Group’s (3333.HK) residential developments in Hong Kong. On July 22, 2021, the Hong Kong Monetary Authority (HKMA) hauled HSBC and its colleagues in to explain the no lend decision on Evergrande’s two Hong Kong in process property  developments. Wouldn’t you know it, this subtle re-think request caused the banks to reverse course; and*Daisy Chain:This move by the HKMA and clearly prompted by authorities in mainland China intimates that Evergrande poses significant systemic risk for mainland China. Government officials in Shenyang are prompting SOEs to increase their ownership in Shengjing Bank (2966.HK), which is 36% owned by Evergrande and lent it an estimated USD 15.5 bn.    

HSBC Holdings Plc – Strong Armed By The HKMA

*Earnings Appear Overstated: Bajaj Finance (BAF.IN) [Bajaj] posted FY 1Q22 results of INR 10.2 bn, declining INR 3.4 bn (25.6%) linked quarter driven by weakness in Consumer Financing. The loss provision increase of INR 5.2 bn (42.2%), which - despite the growth - still did not keep up with the pace of stated NPA growth; and *Time To Man Up:  The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 193 bn at FY 1Q22 – increasing at 281.3% on an annualized basis. By our calculation, reserves (much of the portfolio is weak consumer credits) need to increase INR 157 bn - representing nearly three years of PBT and over 50% of shareholder’s equity. In other words, Bajaj needs to man up and start reporting losses – this is a troubled financial institution.

*Earnings Appear Overstated: Bajaj Finance (BAF.IN) [Bajaj] posted FY 1Q22 results of INR 10.2 bn, declining INR 3.4 bn (25.6%) linked quarter driven by weakness in Consumer Financing. The loss provision increase of INR 5.2 bn (42.2%), which - despite the growth - still did not keep up with the pace of stated NPA growth; and *Time To Man Up:  The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 193 bn at FY 1Q22 – increasing at 281.3% on an annualized basis. By our calculation, reserves (much of the portfolio is weak consumer credits) need to increase INR 157 bn - representing nearly three years of PBT and over 50% of shareholder’s equity. In other words, Bajaj needs to man up and start reporting losses – this is a troubled financial institution.

United Kingdom

NatWest Group plc operates as a banking and financial services company. The Bank provides personal and business banking, consumer loans, asset and invoice finances, commercial and residential mortgages, credit cards, and financial planning services, as well as life, personal, and income protection insurance. NatWest Group serves clients worldwide.

Barclays PLC is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services.

Barclays PLC is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services.

Bank of Georgia Group PLC operates as a bank. The Bank services includes retail banking and payment services, corporate and investment banking, and wealth management operations solutions. Bank of Georgia Group serves customers in the United Kingdom, Belarus, and Georgia.

Secure Trust Bank PLC accepts deposits and offers retail banking services.  The Company offers automobile and retail point of sale financing, and personal unsecured lending.

Arbuthnot Banking Group PLC, together with its subsidiaries, provides various banking and financial products and services in the United Kingdom. It operates through three segments: Retail Banking, UK Private banking, and Group Centre. The company provides private banking services, such as current accounts, deposit accounts, loans, overdrafts, and foreign exchange services; wealth planning services comprising estate and tax planning, pensions, and wealth preservation and generation; and discretionary investment management services, including asset management and developing tailored investment strategies. It also offers retail banking products and services, such as savings and current accounts; consumer finance products in motor finance, retail finance, and unsecured personal lending areas; and SME?s funding for asset finance, invoice finance, and real estate finance. In addition, the company offers commercial banking services comprising financing and cash transaction requirements of SMEs, as well as household cash management and insurance services. Further, the company offers leasing, debt collection, and property rental and management services. Arbuthnot Banking Group PLC was founded in 1833 and is headquartered in London, the United Kingdom.

Metro Bank PLC provides a full range of commercial banking services for retail and institutional customers. The Bank offers services such as current accounts, mortgages, safe deposit boxes, cash management, private banking, and debit and credit cards. Metro Bank conducts its business in the United Kingdom.

Paragon Group of Cos PLC provides lending services, including personal financing, vehicle financing, and an assortment of residential mortgage choices.  The Group's mortgage loans are secured on residential properties within the United Kingdom.  Paragon offers its full range of services on-line through interactive websites.

Aviva PLC operates as an international insurance company that provides all classes of general and life assurance, including fire, motor, marine, aviation, and transport insurance. The Company also offers a variety of financial services, including unit trusts, stockbroking, long-term savings, and fund management.

Legal & General Group plc is a holding company. The Company, through its subsidiaries, provides savings, risk and investment management services such as annuities, long-term savings, life assurance and financial protection products. Legal & General Group's products are sold through bank, building society relationships, Independent Financial Advisers and directly to customers.

Hang Seng Bank Limited and its subsidiaries provide banking and related financial services.

Fifth Third Bancorp is a diversified financial services company that operates banking centers in the Midwestern and Southeastern regions of the United States. The Company's principal businesses include retail banking, commercial banking, investment advisory, and data processing.

BOC Hong Kong (Holdings) Limited provides a comprehensive range of financial products and services to retail and corporate customers.  Its products include retail banking, corporate banking, and treasury services.  The Company operates its branches in Hong Kong and China.

CTBC Financial Holding Company Ltd. is a holding company.  Through its subsidiaries, the Company provides a variety of banking and financial services, including deposit, loan, guarantee, international banking, trust banking, credit card, investment banking, safety deposit box, and Internet banking services.

Public Bank Berhad provides a range of banking and financial services which include leasing and factoring, stock and futures broking, financing for the purchase of licensed public vehicles, and other financial services. The Group's overseas operations include branches in Hong Kong, Sri Lanka, Laos, Cambodia, and Vietnam.

Malayan Banking Berhad operates as a bank. The Company provides financial services such as insurance, asset management, stock broking, nominee services, venture capital, leasing, and Internet banking. Malayan Banking Berhad serves customers in South East Asia.

Ping An Bank Co Ltd provides a full range of commercial banking services including RMB and foreign currency deposit, loan, international and domestic settlement, discount, currency trading, letter of credit, bank guarantee, and other related services.

KB Financial Group Inc. (the "Company"), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfer with the former shareholders of its subsidiaries including Kookmin Bank in order to provide management services and financing to associated companies. The headquarters are located at Seoul, Korea

Bank of Beijing Company Ltd. attracts deposits and offers commercial banking services.  The Bank offers short-, medium- and long-term loans, insurance, foreign exchange, international settlement, government bonds, and other products and services.

China Everbright Bank Company Limited provides banking services. The Company offers deposits, loans, domestic settlement, currency trading, and other services. China Everbright Bank provides its services to individuals, enterprises, and other clients.

Standard Chartered PLC is an international banking group operating principally in Asia, Africa, and the Middle East. The Company offers its products and services in the personal, consumer, corporate, institutional and treasury areas.

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Standard Chartered (STAN LN)

Asian Banks – Funding Costs Can Surprise

Many banks have high levels of fixed deposits. As these mature, they re-price at lower rates. The scope for margin expansion is considerable....

Daniel Tabbush

Hang Seng Bank – Wuihfung Remains In Full Control

HANG SENG BANK: Hang Seng reported a poor 1H21 HOH operating result. If provisions didn't decline 65%, results would have been worse. It under...

Thomas J. Monaco

Banks – Margins

With full data out from Singapore’s banks, it is becoming even clearer, how loan mix can impact net interest income, and margins. It is also a...

Daniel Tabbush

HSBC Holdings Plc – Strong Armed By The HKMA

HSBC HOLDINGS: HSBC had an epiphany of declining mortgages on two of Evergrande’s local developments. The HKMA wanted an explanation and wouldn’t...

Thomas J. Monaco

Bajaj Finance – Just BAFfling

BAJAJ FINANCE: Bajaj posted a QOQ FY 1Q22 results decline 25.6% driven by credit weakness in Consumer. Net new NPLs increased at 281% annualized...

Thomas J. Monaco

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