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 Banks:  Beyond the Ides of March

Monex Group (8698 JP): Upside Is Unlikely Due to Weak Cryptocurrency Markets

TSE's Market Structure Review: Public Comments As Expected, But Miss The Mark

Windamee Research

Japanese Banks

Equity Bottom-Up

1Q FY3/2020 results from <a href="https://www.smartkarma.com/entities/shizuoka-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:4437:1">Shizuoka Bank (8355 JP)</a>, one of Japan’s largest regional banks, were underwhelming.  However, a weaker first half had been hinted at by management in the bank’s FY3/2020 profit guidance issued in May this year so, while disappointing, the weak start to the year should not have been an entirely unexpected event for the market.Consolidated net profits fell 41.5% YoY to ¥8.44 billion (compared to ¥14.43 billion in 1Q FY3/2019).  Key factors behind the disappointing results were lower net interest and fee income, lower trading profits, and substantially higher credit costs (25bps versus 12bps in 1Q FY3/2019).  Weaker trading results from 25.6%-owned online brokerage <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:14211:1">Monex Group Inc (8698 JP)</a> also weighed on consolidated profits.  While commercial and retail bank lending grew by 4.4% YoY, this was not enough to offset the YoY decline in net interest margin from 100bps to 96bps.Foreigners own in aggregate around 17.1% of outstanding shares.  The stock is down 22.7% YoY, and down 12.2% in the last 6 months.  While this curiously represents one of the better share price performances among the regional banks this year, we expect further share price weakness in the short-term in reaction by the market to the bank’s 1Q FY3/2020 results.

1Q FY3/2020 results from Shizuoka Bank (8355 JP), one of Japan’s largest regional banks, were underwhelming.  However, a weaker first half had been hinted at by management in the bank’s FY3/2020 profit guidance issued in May this year so, while disappointing, the weak start to the year should not have been an entirely unexpected event for the market.Consolidated net profits fell 41.5% YoY to ¥8.44 billion (compared to ¥14.43 billion in 1Q FY3/2019).  Key factors behind the disappointing results were lower net interest and fee income, lower trading profits, and substantially higher credit costs (25bps versus 12bps in 1Q FY3/2019).  Weaker trading results from 25.6%-owned online brokerage Monex Group Inc (8698 JP) also weighed on consolidated profits.  While commercial and retail bank lending grew by 4.4% YoY, this was not enough to offset the YoY decline in net interest margin from 100bps to 96bps.Foreigners own in aggregate around 17.1% of outstanding shares.  The stock is down 22.7% YoY, and down 12.2% in the last 6 months.  While this curiously represents one of the better share price performances among the regional banks this year, we expect further share price weakness in the short-term in reaction by the market to the bank’s 1Q FY3/2020 results.

Shizuoka Bank (8355 JP) - Underwhelming but Not Unexpected  (1Q FY3/2020 Results)