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

Thematic (Sector/Industry)

*Pre-Announcement Has Sector Implications: Fukuoka Financial Group (8354.JP)  [FFG] recently announced a revision to its FY 2019 consolidated net profit guidance from JPY 148.5 bn to JPY 111 bn, and recurring profit from JPY 52.5 bn to a loss of JPY 5 bn due primarily to two unexpected credit events;* Domestic Year-End Credit Events: The Financial Services Agency (FSA) published a discussion paper in December 2019 that discussed forward-looking method for loss provisioning, which was the impetus for the way FFG to calculated is loan loss reserve, just as precautionary reserves related to COVID-19 made their impact; and*Mizuho Domestic Results Could Be Ugly: By our analysis, Mizuho Financial Group (8411.JP) fares the worst, with a potential negative impact to FY 2019 consensus forecasts of between 10.1%-29.5%. Mitsubishi UFJ Financial Group (8306.JP) [MUFG] and Sumitomo Mitsui Financial Group (8316.JP) should see a consensus decline of between 1.9%-3.3% and 1.5%-2.3%, respectively, by our calculation.

*Pre-Announcement Has Sector Implications: Fukuoka Financial Group (8354.JP)  [FFG] recently announced a revision to its FY 2019 consolidated net profit guidance from JPY 148.5 bn to JPY 111 bn, and recurring profit from JPY 52.5 bn to a loss of JPY 5 bn due primarily to two unexpected credit events;* Domestic Year-End Credit Events: The Financial Services Agency (FSA) published a discussion paper in December 2019 that discussed forward-looking method for loss provisioning, which was the impetus for the way FFG to calculated is loan loss reserve, just as precautionary reserves related to COVID-19 made their impact; and*Mizuho Domestic Results Could Be Ugly: By our analysis, Mizuho Financial Group (8411.JP) fares the worst, with a potential negative impact to FY 2019 consensus forecasts of between 10.1%-29.5%. Mitsubishi UFJ Financial Group (8306.JP) [MUFG] and Sumitomo Mitsui Financial Group (8316.JP) should see a consensus decline of between 1.9%-3.3% and 1.5%-2.3%, respectively, by our calculation.

Japan Mega-Banks – Fukuoka Financial A Harbinger For Results Season

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

Tiny, struggling <a href="https://www.smartkarma.com/entities/shimane-bank-ltd" target="_blank" data-smartkarma-citation="entities:5219:1" rel="noopener">Shimane Bank Ltd/ The (7150 JP)</a>, a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan that in November of last year threw in its lot with <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> and is now a 34%-owned affiliate of the online financial specialist, has announced an upward revision to FY3/2020 earnings.  That’s the good news.  The bad news is that the upward revision is just ¥100 million, the bank is still predicting a consolidated net loss for FY3/2020 of close to ¥2.3 billion, the dividend remains suspended, credit costs and the bank’s non-performing loans are way up, the bank’s Overhead Ratio (OHR) is still not under control, and management has decided not to publish earnings guidance for FY3/2021.  Despite the infusion of new capital from the SBI Group, the stock price has fallen even further since our last Insight <a href="https://www.smartkarma.com/insights/shimane-bank-7150-jp-and-behold-a-pale-knight" target="_blank" data-smartkarma-citation="insights:32314" rel="noopener">Shimane Bank (7150 JP):  And Behold, a Pale Knight</a> to just over the ¥400 level.Caveat Emptor!  (May the Buyer Beware!)

Tiny, struggling Shimane Bank Ltd/ The (7150 JP), a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan that in November of last year threw in its lot with Sbi Holdings (8473 JP) and is now a 34%-owned affiliate of the online financial specialist, has announced an upward revision to FY3/2020 earnings.  That’s the good news.  The bad news is that the upward revision is just ¥100 million, the bank is still predicting a consolidated net loss for FY3/2020 of close to ¥2.3 billion, the dividend remains suspended, credit costs and the bank’s non-performing loans are way up, the bank’s Overhead Ratio (OHR) is still not under control, and management has decided not to publish earnings guidance for FY3/2021.  Despite the infusion of new capital from the SBI Group, the stock price has fallen even further since our last Insight Shimane Bank (7150 JP):  And Behold, a Pale Knight to just over the ¥400 level.Caveat Emptor!  (May the Buyer Beware!) 

Shimane Bank (7150 JP):  A Paler Shade of Red

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/403/original/2020-02-18_08-44-22.png?1581983074" class="editor-image img-responsive" data-smartkarma-image-id="118403"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/404/original/2020-02-18_08-42-56.png?1581983098" class="editor-image img-responsive" data-smartkarma-image-id="118404"></figure><div class="content-caption">Source • Japan Analytics</div>THREE-YEAR LOW - With <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone (5108 JP)</a>'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/405/original/2020-02-18_09-29-28.png?1581985792" class="editor-image img-responsive" data-smartkarma-image-id="118405"></figure><div class="content-caption">Source • Japan Analytics</div>LEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-<ul>
<li>Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.</li>
<li>The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.</li>
<li>The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.</li>
<li>
All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.
<hr>
• SECTOR SCORES •
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/410/original/2020-02-18_09-55-29.png?1581987489" class="editor-image img-responsive" data-smartkarma-image-id="118410"></figure><div class="content-caption">Source • Japan Analytics</div>
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 
</li>
</ul>

Source • Japan AnalyticsTHREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. Source • Japan AnalyticsLEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-
Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.
The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.
The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.

All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.

• SECTOR SCORES •
Source • Japan Analytics
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 



🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

Sumitomo Mitsui Trust Holdings / Equity Bottom-Up

<section id="research-document-GPS-3226601--section_3" data-jpmucid="section-3226601-649750a3756f407d8161a979bd684d4d"><section id="research-document-GPS-3226601--section_7" data-jpmucid="section-3226601-0e5c8192f0094e27a4e661e117937823"><ul data-jpmucid="ul-3226601-fd899d950d064363948c22635ca0a029">
<li data-jpmucid="li-3226601-75b10568706b49de9ee7aed1c6efd8e1">SMTH posted well-balanced FY 1H19 results, achieving growth in net business income and net profit. </li>
<li data-jpmucid="li-3226601-75b10568706b49de9ee7aed1c6efd8e1">SMTH Lowered Guidance For Customer-facing Businesses. </li>
</ul>
<ul data-jpmucid="ul-3226601-fd899d950d064363948c22635ca0a029">
<li data-jpmucid="li-3226601-3d61c3c251564b6db7b2e03c2812b45c">
High Yield F/X Credit Growth.  </li>
<li data-jpmucid="li-3226601-00592950bf1e4c4787093005a975b177">
Growth By Cost Rationalization.  </li>
<li data-jpmucid="li-3226601-00592950bf1e4c4787093005a975b177"> Balance Sheet Restructure: </li>
</ul></section></section>


SMTH posted well-balanced FY 1H19 results, achieving growth in net business income and net profit. 
SMTH Lowered Guidance For Customer-facing Businesses. 



High Yield F/X Credit Growth.  

Growth By Cost Rationalization.  
 Balance Sheet Restructure: 


Sumitomo Mitsui Trust Holdings - FY 2019 Earnings Appear To Be In The Bag But Future Prospects Weak

Mizuho Financial Group / Equity Bottom-Up

<ul data-jpmucid="ul-3226601-e69194616dcf4ae0842bfb6ba5805fa7">
<li data-jpmucid="li-3226601-53581a75385447f08314f4c5f851fe55">Mizuho Made Significant Bottom-line Progress YOY in FY 2019. </li>
<li data-jpmucid="li-3226601-53581a75385447f08314f4c5f851fe55">Profit Growth Sustainability Is Questioned.  </li>
<li data-jpmucid="li-3226601-bb85d14fb03340c58eb26902fa429607">Hedging The Securities Portfolio May Not Maximize Returns. </li>
<li data-jpmucid="li-3226601-bb85d14fb03340c58eb26902fa429607">SoftBank Overhang for Mizuho and Other Creditors. </li>
</ul>


Mizuho Made Significant Bottom-line Progress YOY in FY 2019. 
Profit Growth Sustainability Is Questioned.  
Hedging The Securities Portfolio May Not Maximize Returns. 
SoftBank Overhang for Mizuho and Other Creditors. 


Mizuho Financial Group - The 'Ho You Know

Japan

Shinkin Central Bank is a central bank for shinkin banks nationwide, operating as a cooperative financial institution.  The Bank has developed businesses in a variety of fields that contribute the shinkin banking industry.  The Bank's services include enhancement of the credit standing, efficient use of shikin bank's surplus funds, and settlement of domestic exchange transaction.

Resona Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides financial services, including banking, trust operations, and credit card services. Resona Holdings also offers consulting services related to personal loans, asset management, and asset succession.

Concordia Financial Group, Ltd. is a holding company established through the merger of Bank of Yokohama and Higashi-Nippon Bank. The Company provides banking services and other financial services.

The Chiba Bank, Ltd. is a regional bank based in Chiba Prefecture. The Bank offers general banking services including deposits, loans, and foreign exchange transactions. The Chiba Bank also develops software and provides financial services such as leasing, securities brokerage, letter of credit, and credit cards.

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

Mebuki Financial Group Inc. is a holding company established through the merger of Joyo Bank and Ashikaga Bank. As a financial group, the Company offers deposits, Loans, foreign exchange transactions, commercial and trust banking. Mebuki Financial Group also provides financial services such as letter of credit, credit cards and consulting.

SBI Shinsei Bank, Ltd. provides banking services including deposits, loans, and foreign exchange transaction, as well as investment trust service and issuance of long-term bonds.

The Gunma Bank, Ltd. is a regional bank based in Gunma Prefecture.  The Bank provides banking services such as deposits, loans, and foreign exchange transaction.  The Gunma Bank also provides financial services such as leasing, credit cards, letter of credit, and investment advisory, and develops information systems.

The Hachijuni Bank, Ltd. is a regional bank based in Nagano Prefecture. The Bank provides banking services such as deposits, loans, foreign exchange transactions, and trust accounts. The Bank also provides financial services such as leasing, credit cards, credit guarantee, debt recovery, trading, and venture capital and operates branches overseas.

CIMB Group Holdings Berhad provides commercial banking and related financial services. The Company and its subsidiaries, operate as a regional universal bank offering a full range of financial products and services, covering corporate and investment banking, consumer banking, treasury, insurance and asset management.

BDO Unibank Inc provides banking services. The Bank offers saving accounts, investment, loans, credit and debit cards, remittance, insurance, and trade financing services. BDO Unibank serves customers in Philippines.

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.

Bank of Baroda owns and operates commercial banks in India.  The Group's banks provide the traditional forms of banking services, including CD's, Credit Card services and a variety of car loans, in addition to gold banking and a range of insurance services.  The Group also owns IBU International Finance Limited, an international banking company in Hong Kong.

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.

Bank of Nanjing Co., Ltd. operates commercial banking businesses. The Company offers deposits, loans, settlement, discounting, financial bond issuance, government bond underwriting, bank guarantee, and other related financial services. Bank of Nanjing provides services for enterprises and individuals.

E.Sun Financial Holding Company Ltd. is a holding company.  Through its subsidiaries, the Company provides banking, brokerage and dealer services.

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.

IndusInd Bank Limited is a Mumbai-based Indian new generation bank established in 1994. The Bank provides a range of banking and financial services including  wholesale banking, credit monitoring, risk management, tele-banking, investment banking and commercial lending. IndusInd Bank operates branches throughout India as well as an office in Dubai and London.

Sumitomo Mitsui Trust Holdings, Inc. is a holding company established jointly by Chuo Mitsui Trust Holdings and Sumitomo Trust and Banking. As a financial group, the Bank provides trust banking business, as well as securities brokerage, assets management, and related financial services.

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Sumitomo Mitsui Trust Holdings (8309 JP)

Japan Mega-Banks – Fukuoka Financial A Harbinger For Results Season

*Pre-Announcement Has Sector Implications: Fukuoka Financial Group (8354.JP) [FFG] recently announced a revision to its FY 2019 consolidated net...

Thomas J. Monaco

Shimane Bank (7150 JP): A Paler Shade of Red

Tiny, struggling Shimane Bank Ltd/ The (7150 JP), a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan...

J. Brian Waterhouse

🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

THREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our...

Campbell Gunn

Sumitomo Mitsui Trust Holdings - FY 2019 Earnings Appear To Be In The Bag But Future Prospects Weak

SMTH posted well-balanced FY 1H19 results, achieving growth in net business income and net profit. SMTH Lowered Guidance For Customer-facing...

Thomas J. Monaco

Mizuho Financial Group - The 'Ho You Know

Mizuho Made Significant Bottom-line Progress YOY in FY 2019. Profit Growth Sustainability Is Questioned. Hedging The Securities Portfolio May...

Thomas J. Monaco

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