Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

J. Brian Waterhouse has been covering the Japanese financial sector as an analyst continuously since 1976, working for CLSA, Japaninvest, Rabobank, HSBC Securities, James Capel, Marine Midland Bank of New York and National & Grindlays Bank.  He has been ranked No.1 overall in Japanese banks research in Japan by Asiamoney for 6 of the past 9 years and was runner-up in 2015.  He was awarded the coveted Starmine prize as top Japanese bank stock picker in 2012 and 2014 and was runner-up in 2013.  He frequently appears on TV, radio and in international print media as a commentator on Japanese banking.

Senior Bank Analyst - Japanese Banks

Japanese Bank Lending: A Pause For Breath

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

The megabankers are awash in cash: their loans to deposits ratios (LDR)  -  an important measure of overall efficiency  -  have collapsed to below 52%, whereas back in 2001 they were close to 98%.  In the meantime, margins remain under pressure amidst this hyper-liquidity, banks are struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, credit costs are rising exponentially, while the COVID-19 pandemic has created unprecedented demand from corporate borrowers for loans but made at virtually no profit margin.  Return on asset (RoA) and return on equity (RoE) ratios can only deteriorate further in such an environment.While many Japanese bank stocks have risen by double-digits over the last three months, rising on a tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We see no signs of this trend reversing.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

The megabankers are awash in cash: their loans to deposits ratios (LDR)  -  an important measure of overall efficiency  -  have collapsed to below 52%, whereas back in 2001 they were close to 98%.  In the meantime, margins remain under pressure amidst this hyper-liquidity, banks are struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, credit costs are rising exponentially, while the COVID-19 pandemic has created unprecedented demand from corporate borrowers for loans but made at virtually no profit margin.  Return on asset (RoA) and return on equity (RoE) ratios can only deteriorate further in such an environment.While many Japanese bank stocks have risen by double-digits over the last three months, rising on a tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We see no signs of this trend reversing.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

Japanese Banks: Awash in Cash