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

The Utah-based bank saw its credit costs in sharp reversal during the most recent quarter. This bank had stood out in our research some months ago, where its credit costs were 58x higher than recent levels. Figures can still improve.

The Utah-based bank saw its credit costs in sharp reversal during the most recent quarter. This bank had stood out in our research some months ago, where its credit costs were 58x higher than recent levels. Figures can still improve.

Thematic (Sector/Industry)

The story for US banks is all about re-opening the economy, improved credit costs and top line. New macro data for August suggests that the economy continues to improve. With the Fed’s new higher inflation target, one must expect lower rates for longer, which can mean reasonably higher loan demand. If and where the yield curve maintains steepness or steepens further, banks should be able to rebuild net interest income with limited credit risk. Alongside continued improvement in the virus, the Centers for Disease Control and Prevention (CDC) now suggests that testing should not be done by all and it gives new data that suggests the risks of getting sick and dying are far less dire than most expected, or were told, in March and April. These last two points are positive, as they can have an impact on keeping the economy open and support improved confidence in spending, investment.

The story for US banks is all about re-opening the economy, improved credit costs and top line. New macro data for August suggests that the economy continues to improve. With the Fed’s new higher inflation target, one must expect lower rates for longer, which can mean reasonably higher loan demand. If and where the yield curve maintains steepness or steepens further, banks should be able to rebuild net interest income with limited credit risk. Alongside continued improvement in the virus, the Centers for Disease Control and Prevention (CDC) now suggests that testing should not be done by all and it gives new data that suggests the risks of getting sick and dying are far less dire than most expected, or were told, in March and April. These last two points are positive, as they can have an impact on keeping the economy open and support improved confidence in spending, investment.

There is a major credit cost improvement across many banks globally during 2Q20. This is likely driven by improved credit modeling for defaults and losses, which will be driven in large part by economic recovery, rising oil prices and unprecedented central bank and government support. This does not mean that there risks do not remain, but it shows that perhaps many banks took too much provisions during 1Q20. Some banks stand out, where credit costs were several times higher than full year 2019.

There is a major credit cost improvement across many banks globally during 2Q20. This is likely driven by improved credit modeling for defaults and losses, which will be driven in large part by economic recovery, rising oil prices and unprecedented central bank and government support. This does not mean that there risks do not remain, but it shows that perhaps many banks took too much provisions during 1Q20. Some banks stand out, where credit costs were several times higher than full year 2019.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In our March Strategy we provide a top down analysis of U.S. equity market drivers, and highlight opportunities within the following Sectors:• Technology: Overweight.  Technology remains a leadership Sector as uptrends and significant bases remain intact. The recent pullback has resulted in a number of groups breaking to new highs especially in the Software related groups. Historically investors will move to software related names to reduce risk as these companies often have a source of reoccurring revenue. Large- and Mid-cap semiconductors have also been quite resilient, whereas small- and micro-cap semis are seeing breakdowns in price and RS.• Financials: Overweight. Financials continue to plod up and to the right. Banks and thrifts, exchanges, investing banking and brokerage, pawn shops and Latin/South American banks look attractive.

In our March Strategy we provide a top down analysis of U.S. equity market drivers, and highlight opportunities within the following Sectors:• Technology: Overweight.  Technology remains a leadership Sector as uptrends and significant bases remain intact. The recent pullback has resulted in a number of groups breaking to new highs especially in the Software related groups. Historically investors will move to software related names to reduce risk as these companies often have a source of reoccurring revenue. Large- and Mid-cap semiconductors have also been quite resilient, whereas small- and micro-cap semis are seeing breakdowns in price and RS.• Financials: Overweight. Financials continue to plod up and to the right. Banks and thrifts, exchanges, investing banking and brokerage, pawn shops and Latin/South American banks look attractive.

U.S. Equity Strategy: Cyclicals Are Leadership, Small-Caps Are Closing the Gap.

We are witnessing widespread bullish inflections throughout the U. S. Financial Sector, specifically within our Asset Manager, Bank, Credit Card Issuers, and Investment Banks/Brokers Groups. This is also confirmed by the XLF’s relative strength inflection higher. In this week’s report we narrow in on actionable ideas in the following Financial Groups:<ul><li>Mortgage Insurance (FN-20). MTG, RDN, ESNT, NMIH... pages 8-10</li><li>Credit Card Issuers (FN-27). AXP, COF, SYF, DFS... pages 11-13</li><li>Banks, Super-Regional (FN-15). BAC, WFC, USB, PNC, BBT, RF, FITB... pages 14-17</li><li>Banks, Western, Large-Cap (FN-16). SIVB, ZION, WAL, UMPQ, CATY... pages 18-20</li></ul>

We are witnessing widespread bullish inflections throughout the U. S. Financial Sector, specifically within our Asset Manager, Bank, Credit Card Issuers, and Investment Banks/Brokers Groups. This is also confirmed by the XLF’s relative strength inflection higher. In this week’s report we narrow in on actionable ideas in the following Financial Groups:Mortgage Insurance (FN-20). MTG, RDN, ESNT, NMIH... pages 8-10Credit Card Issuers (FN-27). AXP, COF, SYF, DFS... pages 11-13Banks, Super-Regional (FN-15). BAC, WFC, USB, PNC, BBT, RF, FITB... pages 14-17Banks, Western, Large-Cap (FN-16). SIVB, ZION, WAL, UMPQ, CATY... pages 18-20

United States

Zions Bancorporation is a bank holding company that operates full-service banking offices in western United States. The Company also offers an array of investment, mortgage, insurance, and electronic commerce services.  In addition, Zions provides financing solutions for small businesses across the United States.

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Zions Bancorporation (ZION US)

Zions – Most Prone To Reversals

Credit costs in FY20 were 11x higher than FY19, despite 4Q20 reversals. The bank can see a greater decline during FY21 than most US banks. It also...

Daniel Tabbush

US Banks – New Data Supportive

New data in US shows a continued improvement in the economy and new data from the CDC should be well received by law-makers, consumers and the...

Daniel Tabbush

Banks – Credit Cost Delta

There is a major credit cost improvement across many banks globally during 2Q20. This is likely driven by improved credit modeling for defaults and...

Daniel Tabbush

U.S. Equity Strategy: Cyclicals Are Leadership, Small-Caps Are Closing the Gap.

In our March Strategy we provide a top down analysis of U.S. equity market drivers, and highlight opportunities within the following Sectors:•...

Vermilion Research

U. S. Equity Strategy Weekly

We are witnessing widespread bullish inflections throughout the U. S. Financial Sector, specifically within our Asset Manager, Bank, Credit Card...

Vermilion Research

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