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.

Equity Bottom-Up

Bendigo And Adelaide Bank / Equity Bottom-Up

One of Australia’s smaller banks has just announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance for the full year.

One of Australia’s smaller banks has just announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance for the full year. 

Australian Banks – Profit And Dividends Surge

We have all seen how credit costs have come down for US banks. While the theme is relevant globally, the delta can vary dramatically. A closer look at banks with exposure to oil may give insights to how DBS will model its provisions during the final quarter of 2020.

We have all seen how credit costs have come down for US banks. While the theme is relevant globally, the delta can vary dramatically. A closer look at banks with exposure to oil may give insights to how DBS will model its provisions during the final quarter of 2020. 

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

*Results Ahead Of Consensus: Bank of America (BAC.US) [BAC] reported 4Q20 bottom-line results of USD 5.2 bn, increasing USD 768 mn (17.3%) linked quarter. Results were driven by two factors: a) a USD 1.3 bn reduction in loss provision, tracking the overall improvement in net new NPLs; and b) a USD 474 mn (3.3%) decline in costs attributed to the 55.4% reduction in other operating expenses;*BAC Still Needs To Focus On Credit Quality: BAC’s NPLs increased USD 386 mn (8.2%) linked quarter and represent 55 bp of total loans – up 5 bp linked quarter due to both the NPL increase and the 2.9% contraction in loans outstanding. Although the NPL ratio is generally low, we are concerned with both the 30-89 days past due and commercial receivable criticisms which both increased; and*Buyback Will Be Attempted:BAC’s Standardized CET1 remained roughly unchanged linked quarter at 11.9%, and is 140 bp above BAC's capital requirement target.This should allow BAC to execute a share buyback of USD 3.2 bn in 1Q21 – USD 2.9 bn under the income test plus USD 300 mn to offset employee issuance.

*Results Ahead Of Consensus: Bank of America (BAC.US) [BAC] reported 4Q20 bottom-line results of USD 5.2 bn, increasing USD 768 mn (17.3%) linked quarter. Results were driven by two factors: a) a USD 1.3 bn reduction in loss provision, tracking the overall improvement in net new NPLs; and b) a USD 474 mn (3.3%) decline in costs attributed to the 55.4% reduction in other operating expenses;*BAC Still Needs To Focus On Credit Quality: BAC’s NPLs increased USD 386 mn (8.2%) linked quarter and represent 55 bp of total loans – up 5 bp linked quarter due to both the NPL increase and the 2.9% contraction in loans outstanding. Although the NPL ratio is generally low, we are concerned with both the 30-89 days past due and commercial receivable criticisms which both increased; and*Buyback Will Be Attempted:BAC’s Standardized CET1 remained roughly unchanged linked quarter at 11.9%, and is 140 bp above BAC's capital requirement target.This should allow BAC to execute a share buyback of USD 3.2 bn in 1Q21 – USD 2.9 bn under the income test plus USD 300 mn to offset employee issuance. 

Bank of America – Driven Entirely By Credit

Thematic (Sector/Industry)

It should be no surprise that US banks’ credit costs have turned to reversals. This is the case for the largest banks reporting, even if not for all the community or regional banks. What may surprise though is that despite this, credit costs for FY20 remain exceptionally high compared with recent years. This suggests that credit costs can remain low during FY21.

It should be no surprise that US banks’ credit costs have turned to reversals. This is the case for the largest banks reporting, even if not for all the community or regional banks. What may surprise though is that despite this, credit costs for FY20 remain exceptionally high compared with recent years. This suggests that credit costs can remain low during FY21. 

*Super Results And Will Only Get Better: JP Morgan Chase &amp; Co (JPM.US) [JPM] reported 4Q20 bottom-line results of USD 12.1 bn, increasing USD 2.7 bn (28.5%) linked quarter. On a core operating basis, we note an even stronger QOQ improvement, with numbers coming in at USD 12.1 bn or USD 3.1 bn (34.6%) higher than 3Q20. Results were essentially driven by a reserve reversal of USD 1.9 bn, which no doubt will be a consistent theme in 2021;*Credit Weakness Significantly Decelerates: We find that net new NPLs on a linked quarter amounted to only USD 1 mn or well under 1.0% on an annualized basis. The pace of increase has decelerated from the 7.0% and 26% posted in 3Q20 and 2Q20, respectively; and*Solid Share Buyback In Place: JPM noted that it could repurchase a maximum number of shares of USD 4.5 bn for 1Q21.

*Super Results And Will Only Get Better: JP Morgan Chase &amp; Co (JPM.US) [JPM] reported 4Q20 bottom-line results of USD 12.1 bn, increasing USD 2.7 bn (28.5%) linked quarter. On a core operating basis, we note an even stronger QOQ improvement, with numbers coming in at USD 12.1 bn or USD 3.1 bn (34.6%) higher than 3Q20. Results were essentially driven by a reserve reversal of USD 1.9 bn, which no doubt will be a consistent theme in 2021;*Credit Weakness Significantly Decelerates: We find that net new NPLs on a linked quarter amounted to only USD 1 mn or well under 1.0% on an annualized basis. The pace of increase has decelerated from the 7.0% and 26% posted in 3Q20 and 2Q20, respectively; and*Solid Share Buyback In Place: JPM noted that it could repurchase a maximum number of shares of USD 4.5 bn for 1Q21. 

United States

Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance.  The Company operates through physical stores, the Internet and other distribution channels across North America and elsewhere internationally.

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Wells Fargo & Co (WFC US)

Australian Banks – Profit And Dividends Surge

BEN announced a surge in net profit, mostly due to lower credit costs. What may be more exciting is its far higher interim dividend, and guidance...

Daniel Tabbush

DBS – Modeling Provisions

We have all seen how credit costs have come down for US banks. DBS can see a significant decline in credit costs, with meaningful gas and energy...

Daniel Tabbush

Bank of America – Driven Entirely By Credit

BANK OF AMERICA: BAC's 4Q20 bottom-line of USD 5.2 bn increased 17.3% driven by a USD 1.3 bn reduction in provisions. NPLs increased 8.2%, as did...

Thomas J. Monaco

US Banks – Crumbling Credit Costs

It should be no surprise that credit costs are in reversal for some. What may surprise though is that despite this, credit costs for FY20 remain...

Daniel Tabbush

JP Morgan Chase & Co. – Just Wow

JP MORGAN CHASE: JPM] reported 4Q20 bottom-line results increased 28.5% linked quarter, driven by a reserve reversal. Net new NPLs on a linked...

Thomas J. Monaco

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