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

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

Tottori Bank (8383 JP):  Trapped in the Sands

Tochigi Bank (8550 JP):  Hoisting the First Flag

Windamee Research

Japanese Banks

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/5219" target="_blank" data-smartkarma-citation="entities:5219:1">Shimane Bank Ltd/ The (7150 JP)</a> is a secondary regional bank based in Shimane Prefecture in the Chugoku Region of western Japan.  It is a very small bank with some very large problems.  Management has taken the most unusual step of slashing dividend guidance by 60% from ¥50/share to ¥20/share in order to preserve capital and keep the payout ratio around the 30% level.  Banks do not normally cut their dividends, even in years when they report net losses, so this action by Shimane Bank management should be seen as a sign of just how serious the outlook is when viewed from within the bank. 
Shimane Bank's micro-cap size makes it essentially uninvestible for most professional funds, but the bank should attract investors' attention as a potential harbinger of things to come in the Japanese regional banking sector if the current negative interest rate policy, or NIRP, is maintained for much longer by the Bank of Japan. As of end-March 2018, according to the FSA, 54 out of 106 regional and secondary regional banks incurred a loss from their core operations, with all but two of the 54 recording losses for a second year in succession.  According to the FSA’s calculations, 23 regional and secondary regional banks have been making losses on their core banking operations for 5 years or more.  This situation cannot continue indefinitely.  Caveat emptor!  (May the buyer beware)!

Shimane Bank Ltd/ The (7150 JP) is a secondary regional bank based in Shimane Prefecture in the Chugoku Region of western Japan.  It is a very small bank with some very large problems.  Management has taken the most unusual step of slashing dividend guidance by 60% from ¥50/share to ¥20/share in order to preserve capital and keep the payout ratio around the 30% level.  Banks do not normally cut their dividends, even in years when they report net losses, so this action by Shimane Bank management should be seen as a sign of just how serious the outlook is when viewed from within the bank. 
Shimane Bank's micro-cap size makes it essentially uninvestible for most professional funds, but the bank should attract investors' attention as a potential harbinger of things to come in the Japanese regional banking sector if the current negative interest rate policy, or NIRP, is maintained for much longer by the Bank of Japan. As of end-March 2018, according to the FSA, 54 out of 106 regional and secondary regional banks incurred a loss from their core operations, with all but two of the 54 recording losses for a second year in succession.  According to the FSA’s calculations, 23 regional and secondary regional banks have been making losses on their core banking operations for 5 years or more.  This situation cannot continue indefinitely.  Caveat emptor!  (May the buyer beware)!

Shimane Bank (7150 JP):  Another Flag Raised