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

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

*Positive Operating Jaws Return: Muthoot Finance (MUTH.IN) [Muthoot] reported FY 3Q21 bottom-line results of INR 9.8 bn, increasing INR 716 mn (7.8%) linked quarter. Results were even better when we exclude gains on the gold mark-up, as Muthoot’s core operating result improved INR 969 mn or 11.3%. Results were driven by positive operating jaws, despite the INR 478 mn or 469% linked quarter increase loss provisions which tracked the break in credit; and*Gold Pricing Could Impact Credit: While robustness gold prices augur well for Muthoot, we are concerned about a reversal in gold pricing which could hinder loan growth and credit quality. We note that net new NPLs amounted to INR 661mn during the quarter, which intimates that the annualized growth rate for Stage 3 loans remains elevated at 44.7% - in line with most of the Indian financial sector. While we agree that the backing of the gold loans has likely amongst the strongest collateral, losses will mount during this international risk-on period or when gold prices reverse. It is for these reasons that we believe reserve cover has fallen short to the tune of INR 2.8 bn – about 25% of FY 3Q21 PBT which isn’t bad relatively speaking.

*Positive Operating Jaws Return: Muthoot Finance (MUTH.IN) [Muthoot] reported FY 3Q21 bottom-line results of INR 9.8 bn, increasing INR 716 mn (7.8%) linked quarter. Results were even better when we exclude gains on the gold mark-up, as Muthoot’s core operating result improved INR 969 mn or 11.3%. Results were driven by positive operating jaws, despite the INR 478 mn or 469% linked quarter increase loss provisions which tracked the break in credit; and*Gold Pricing Could Impact Credit: While robustness gold prices augur well for Muthoot, we are concerned about a reversal in gold pricing which could hinder loan growth and credit quality. We note that net new NPLs amounted to INR 661mn during the quarter, which intimates that the annualized growth rate for Stage 3 loans remains elevated at 44.7% - in line with most of the Indian financial sector. While we agree that the backing of the gold loans has likely amongst the strongest collateral, losses will mount during this international risk-on period or when gold prices reverse. It is for these reasons that we believe reserve cover has fallen short to the tune of INR 2.8 bn – about 25% of FY 3Q21 PBT which isn’t bad relatively speaking.  

*Negative Operating Remain Troubling: DBS Group Holdings (DBS.SP) [DBS] reported 4Q20 results of SGD 1.0 bn, declining SGD 285 mn (22.0%) on a linked quarter basis. Results remain troubling across the board, as this is the second consecutive quarter that DBS reported negative operating jaws whilst the decline in loss provisions reversed course on weaker credit;*Credit Risk Challenges Management: We remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs, as this improvement would appear to be in contravention to the stress being experienced regionally. By our calculation, we find that net new NPLs continue to increase – up SGD 631 mn or increasing 41.7% on an annualized basis – more than doubling the figures of SGD 272 mn or 18.9% on an annualized basis for 3Q20. We feel that reserves should be shored up in the neighborhood of SGD 2.8bn – amounting now to three plus full quarters of results, comparing very unfavorably to the SGD 1.3 bn calculated (one quarter of results) just a quarter earlier and suggest that Lakshmi Vilas Bank’s (LVB) risk is not under the control; and *India Deal Poses Significant Challenges: : By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent to the tune of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion. LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al.  DBS expects DBS India to return to profitability and that the LVB deal will be ROE accretive over the next 12-24 months. We’d like some of what management is smoking.

*Negative Operating Remain Troubling: DBS Group Holdings (DBS.SP) [DBS] reported 4Q20 results of SGD 1.0 bn, declining SGD 285 mn (22.0%) on a linked quarter basis. Results remain troubling across the board, as this is the second consecutive quarter that DBS reported negative operating jaws whilst the decline in loss provisions reversed course on weaker credit;*Credit Risk Challenges Management: We remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs, as this improvement would appear to be in contravention to the stress being experienced regionally. By our calculation, we find that net new NPLs continue to increase – up SGD 631 mn or increasing 41.7% on an annualized basis – more than doubling the figures of SGD 272 mn or 18.9% on an annualized basis for 3Q20. We feel that reserves should be shored up in the neighborhood of SGD 2.8bn – amounting now to three plus full quarters of results, comparing very unfavorably to the SGD 1.3 bn calculated (one quarter of results) just a quarter earlier and suggest that Lakshmi Vilas Bank’s (LVB) risk is not under the control; and *India Deal Poses Significant Challenges: : By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent to the tune of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion. LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al.  DBS expects DBS India to return to profitability and that the LVB deal will be ROE accretive over the next 12-24 months. We’d like some of what management is smoking. 

DBS Group Holdings – COVID & India Not A Good Combo

*Better Bottom-line Doesn’t Tell Entire Story: State Bank of India (SBIN.IN) [SBI] reported FY 3Q21 results of INR 55.8 bn, increasing INR 10.1 bn (22.1%) linked quarter. On top of a significant (albeit completely unwarranted) INR 55.0 bn (58.1%) decline in loss provisions, results were also highlighted by a turnaround in SBI’s operating jaws which are now positive; and*Reserve Challenge Should Lead To Capital Raise: While we note a net recovery of INR 48.4 bn (likely a non-recurring event given the exorbitant credit risk), we still find that net new NPLs increased INR 145.7 bn for an annualized increase of 41.6%.  By our calculation, we find that SBI’s reserves are short INR 1.2 bn - nearly four years of pre-tax results or 61% of market-cap.

*Better Bottom-line Doesn’t Tell Entire Story: State Bank of India (SBIN.IN) [SBI] reported FY 3Q21 results of INR 55.8 bn, increasing INR 10.1 bn (22.1%) linked quarter. On top of a significant (albeit completely unwarranted) INR 55.0 bn (58.1%) decline in loss provisions, results were also highlighted by a turnaround in SBI’s operating jaws which are now positive; and*Reserve Challenge Should Lead To Capital Raise: While we note a net recovery of INR 48.4 bn (likely a non-recurring event given the exorbitant credit risk), we still find that net new NPLs increased INR 145.7 bn for an annualized increase of 41.6%.  By our calculation, we find that SBI’s reserves are short INR 1.2 bn - nearly four years of pre-tax results or 61% of market-cap. 

*Challenged Again: HDFC Ltd (HDFC.IN) [HDFC] reported FY 3Q21 results of INR 29.3 bn, marginally increasing INR 557 mn (1.9%) on a linked quarter basis. However, core operating results came in at INR 25.4 bn, declining INR 1.7 bn (6.1%) over the same period – despite net interest income improving INR 4.0 bn (11.2%) off of a 30 bp NIM improvement to 3.00% and loan growth of 1.9%; and*Credit Quality Reverses Course: Given the INR 2.3 bn in NCOs during FY 3Q21, net new NPLs accelerated to INR 8.5 bn and increased 32.5% on an annualized basis. We would have preferred that HDFC be even more vigilant given the continued uncertainty with COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 60 bn or just over two quarters of core operating results.

*Challenged Again: HDFC Ltd (HDFC.IN) [HDFC] reported FY 3Q21 results of INR 29.3 bn, marginally increasing INR 557 mn (1.9%) on a linked quarter basis. However, core operating results came in at INR 25.4 bn, declining INR 1.7 bn (6.1%) over the same period – despite net interest income improving INR 4.0 bn (11.2%) off of a 30 bp NIM improvement to 3.00% and loan growth of 1.9%; and*Credit Quality Reverses Course: Given the INR 2.3 bn in NCOs during FY 3Q21, net new NPLs accelerated to INR 8.5 bn and increased 32.5% on an annualized basis. We would have preferred that HDFC be even more vigilant given the continued uncertainty with COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 60 bn or just over two quarters of core operating results.

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.

Canara Bank Ltd. provides a full range of banking services throughout India. The Group's activities include retail banking, commercial and personal banking, investment management, treasury & NRI services, cash management and assorted ATM facilities.

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.

IDBI Bank Limited provides a range of banking and financial services. The Bank's services include fund-based operations, such as venture capital and fee-based activities, which include merchant banking and debenture trusteeship.

Indian Overseas Bank operates some 1,429 banking branches in India, as well as six branches in overseas locations.  The Group's banks provide loan and deposit schemes, Internet banking, and a full range of banking services.

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.

YES BANK Limited provides banking services. The Bank offers deposits, personal loans, e-banking, trade finance, corporate, and business banking services. YES BANK serves the food and agribusiness, life sciences, healthcare, biotechnology, telecommunications, media, information technology, and infrastructure development industries in India.

UCO Bank provides a full range of banking services throughout India. UCO Bank operates over 1,700 banking branches in India, as well as four branches in overseas locations.

Indian Bank is a full service bank owned by the Government of India. The Bank offers a wide range of services including a foreign currency banking unit at Colombo and specialized overseas branches at Chennai, Bangalore, and Mumbai exclusively for handling foreign exchange  transactions arising out of export, import, remittances and non resident Indian business.

Bank of India, through its subsidiaries, provides corporate, commercial, personal banking, retail, rural, and development banking.  The Group specializes its services towards corporate and medium businesses, in addition to upmarket retail customers.

Bank of the Philippine Islands, through its subsidiaries, provides commercial banking services. The Company's products includes ATM, debit card system, credit card, electronic cash card, internet platform and other services.

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.

Bank for Investment and Development of Vietnam provides commercial banking services. The Company offers deposits, personal loans, e-banking, guarantees, and trade finance for customers, corporate, and financial institutions. Bank for Investment also offers foreign exchange, money market, derivatives, and debt market services.

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.

First Financial Holding Co., Ltd. is a holding company.  Through its subsidiaries, the Company accepts deposits, provides loans and discount, letters of credit, and guarantee services, invests in marketable securities, provides securities brokerage and investment services, as well as provides insurance services.

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

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.

Taiwan Cooperative Financial Holding, through subsidiaries, offers financial services.  The Company offers commercial banking, asset management, bills finance, and securities brokerage services.

Hua Nan Financial Holdings Co., Ltd. is a holding company. Through its subsidiaries, the Company conducts commercial banking, savings, trust, and international banking businesses. In addition, the Group also provides insurance services and acts as a dealer, broker, and underwriter for financial securities.

Hua Nan Financial Holdings Co Ltd. (2880 TT)

PT Bank Negara Indonesia (Persero) Tbk is a state-owned bank that conducts commercial and consumer banking services.

Union Bank of India Limited provides a full range of banking services throughout India. The Company's activities include retail banking, commercial and personal banking, investment management, treasury and NRI services, cash management and assorted ATM facilities. Union Bank has an online tele-banking facility for all its core banking customers.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Union Bank Of India (UNBK IN)

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

Muthoot Finance – Relatively Good

MUTHOOT FINANCE: Muthoot reported a FY 3Q21 7.8% linked quarter results increase. Results were driven by positive operating jaws although...

Thomas J. Monaco

DBS Group Holdings – COVID & India Not A Good Combo

DBS GROUP HOLDINGS: DBS reported a 4Q20 results decline of 22.0% linked quarter. Results remain troubling across the board. India deal poses...

Thomas J. Monaco

State Bank of India – Bad Credit

STATE BANK OF INDIA: SBI reported FY 3Q21 result increase of 22.1%) linked quarter led by a completely unwarranted 58.1% decline in provisions and...

Thomas J. Monaco

HDFC – Credit Turn

HOUSING DEVELOPMENT FINANCE CORP: HDFC reported FY 3Q21 core results decline of 6.1%. Net new NPLs accelerated 32.5%, and reserves light by over...

Thomas J. Monaco

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)