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.

Thematic (Sector/Industry)

<ul>
<li>The Japan stock market is at ~33 year highs with TOPIX now at July 1990 levels</li>
<li>Japan's banks can see greater gains on stocks as they divest sizable holdings</li>
<li>Vast differences how stocks holdings compare with profit, equity, assets</li>
</ul>


The Japan stock market is at ~33 year highs with TOPIX now at July 1990 levels
Japan's banks can see greater gains on stocks as they divest sizable holdings
Vast differences how stocks holdings compare with profit, equity, assets


Japan Banks - TOPIX at July 1990 Levels, Banks' Stock Holdings In Perspective

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

S&P BSE SENSEX Index / Technical Analysis

S&P BSE SENSEX Index (SENSEX INDEX EQUITY)

<ul>
<li>Many major indexes are still testing (and holding above) critical supports. This includes MSCI ACWI (ACWI-US), TOPIX/TOPIX Small/Nikkei 225, EURO STOXX 50, STOXX Europe 600, and the DAX</li>
<li>Our overall outlook remains neutral, and we continue to see many attractive buying opportunities, especially out of Japan, India, and a new one -- Brazil.</li>
<li>Buy ideas focus on the Consumer Discretionary and Financials Sectors, with the vast majority of stock recommendations from Japan, India, and Brazil</li>
</ul>


Many major indexes are still testing (and holding above) critical supports. This includes MSCI ACWI (ACWI-US), TOPIX/TOPIX Small/Nikkei 225, EURO STOXX 50, STOXX Europe 600, and the DAX
Our overall outlook remains neutral, and we continue to see many attractive buying opportunities, especially out of Japan, India, and a new one -- Brazil.
Buy ideas focus on the Consumer Discretionary and Financials Sectors, with the vast majority of stock recommendations from Japan, India, and Brazil


Europe, Japan, $ACWI Testing Critical Supports; Rising DXY, Global Sovereign Yields a Major Headwind

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) came to +9.7% YoY in December 2020: the highest YoY growth level ever recorded, surpassing the previous record of +9.5% YoY growth rate set back in August and far exceeding the banks’ aggregate loan growth which declined in December 2020 to just +5.3% YoY.  This represented the 171st consecutive month of YoY deposit growth for all JBA member banks.  Banks have more money than they know what to do with, and not nearly enough borrowers to lend to.Taking a closer look at the data, major bank deposit balances have actually fallen in five of the last six months (November being the exception). In contrast to the major banks, deposit balances at both the regional and secondary regional banks continue to grow markedly, +8.9% YoY (a new all-time record) and +8.6% YoY (2nd-highest YoY growth rate ever), respectively.  Unsurprisingly, their loan-to-deposit ratios (LDRs) continue to deteriorate rapidly, although nowhere near the average LDR of the major banks which is now down to 51.4%.‘Profitless prosperity’ remains an ongoing reality for Japan’s banks: awash in cash, margins under relentless pressure and struggling to avoid yet another year of shareholder disappointment through further profits decline.  Some small local banks are already forecasting consolidated net losses for FY3/2021 that have little to do with the adverse economic impact of COVID-19 per se but reflect the difficult operating conditions for all Japanese banks in an ongoing near-zero interest rate environment.“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/185/011/original/8300-WR-JBanks-2021-0126-EbbTide+TPNBNKvsTPX+in+2020.jpg?1611797731" class="editor-image img-responsive" data-smartkarma-image-id="185011"></figure></section>

Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) came to +9.7% YoY in December 2020: the highest YoY growth level ever recorded, surpassing the previous record of +9.5% YoY growth rate set back in August and far exceeding the banks’ aggregate loan growth which declined in December 2020 to just +5.3% YoY.  This represented the 171st consecutive month of YoY deposit growth for all JBA member banks.  Banks have more money than they know what to do with, and not nearly enough borrowers to lend to.Taking a closer look at the data, major bank deposit balances have actually fallen in five of the last six months (November being the exception). In contrast to the major banks, deposit balances at both the regional and secondary regional banks continue to grow markedly, +8.9% YoY (a new all-time record) and +8.6% YoY (2nd-highest YoY growth rate ever), respectively.  Unsurprisingly, their loan-to-deposit ratios (LDRs) continue to deteriorate rapidly, although nowhere near the average LDR of the major banks which is now down to 51.4%.‘Profitless prosperity’ remains an ongoing reality for Japan’s banks: awash in cash, margins under relentless pressure and struggling to avoid yet another year of shareholder disappointment through further profits decline.  Some small local banks are already forecasting consolidated net losses for FY3/2021 that have little to do with the adverse economic impact of COVID-19 per se but reflect the difficult operating conditions for all Japanese banks in an ongoing near-zero interest rate environment.“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Banks:  Buddy, Can We Spare You a Dime !

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) confirm the trend that we noted in earlier Smartkarma Insights on Japanese bank lending, namely that lending by the major banks continues to decline in terms of the outstanding loan balance since reaching a peak in June, even though YoY growth rates remain high compared to previous years.Total loan outstandings have fallen in five of the last six months (November being the exception), primarily because of declining loan balances at the major banks.  The declaration of a State of Emergency in several prefectures, as Japan continues to battle a surge in coronavirus infections, is unlikely to change this trend significantly.  However, as noted in other recent Smartkarma Insights on the outlook for the Japanese banking sector in 2021, these are loans, not grants, and will need either to be repaid in full or, if that becomes impossible, be declared as ‘value impaired’ by the lending banks and properly reserved against.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) confirm the trend that we noted in earlier Smartkarma Insights on Japanese bank lending, namely that lending by the major banks continues to decline in terms of the outstanding loan balance since reaching a peak in June, even though YoY growth rates remain high compared to previous years.Total loan outstandings have fallen in five of the last six months (November being the exception), primarily because of declining loan balances at the major banks.  The declaration of a State of Emergency in several prefectures, as Japan continues to battle a surge in coronavirus infections, is unlikely to change this trend significantly.  However, as noted in other recent Smartkarma Insights on the outlook for the Japanese banking sector in 2021, these are loans, not grants, and will need either to be repaid in full or, if that becomes impossible, be declared as ‘value impaired’ by the lending banks and properly reserved against.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Bank Lending: An Ebb Tide in 2021?

A curious thing happened on Friday.  The Japanese Topix Index fell almost 1%, reflecting overnight weakness on Wall Street, but the banking sector rose almost 1%; several small Japanese regional banks went limit-up.  What was going on?  Step forward Chief Cabinet Secretary and Japanese Prime Minister-presumptive Yoshihide Suga who, in a press interview the previous day, commented that there were “too many regional banks” and that “It will be up to each bank’s business decision, but reorganization could also be an option”.
Consolidation in the Japanese banking industry is a hoary old chestnut.  The theme rears its head every 2-3 years, and the stock market has a short-lived flurry of excitement until investors realise that nothing much is going to happen after all.  The problem is that simply allowing Japanese regional banks to merge will not solve their problems. They are not short of capital.  What they need are more business opportunities, more reliance on fee income, and less reliance on interest rate-sensitive business.  They also need a proper spread between their borrowing costs and their loan rates to allow them to generate profits and invest in cost-saving technology; the Bank of Japan’s unorthodox monetary policies have made this almost impossible for some banks. In the meantime, regional populations are declining rapidly, loan margins remain under pressure, the banks are hyper-liquid and struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, and credit costs are rising sharply .
While several Japanese regional bank stocks have risen by double-digits in the last couple of weeks, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  Based on past experience, ‘banking sector consolidation’ as a stock market theme is likely to be very short-lived.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese regional bank stocks.

A curious thing happened on Friday.  The Japanese Topix Index fell almost 1%, reflecting overnight weakness on Wall Street, but the banking sector rose almost 1%; several small Japanese regional banks went limit-up.  What was going on?  Step forward Chief Cabinet Secretary and Japanese Prime Minister-presumptive Yoshihide Suga who, in a press interview the previous day, commented that there were “too many regional banks” and that “It will be up to each bank’s business decision, but reorganization could also be an option”.
Consolidation in the Japanese banking industry is a hoary old chestnut.  The theme rears its head every 2-3 years, and the stock market has a short-lived flurry of excitement until investors realise that nothing much is going to happen after all.  The problem is that simply allowing Japanese regional banks to merge will not solve their problems. They are not short of capital.  What they need are more business opportunities, more reliance on fee income, and less reliance on interest rate-sensitive business.  They also need a proper spread between their borrowing costs and their loan rates to allow them to generate profits and invest in cost-saving technology; the Bank of Japan’s unorthodox monetary policies have made this almost impossible for some banks. In the meantime, regional populations are declining rapidly, loan margins remain under pressure, the banks are hyper-liquid and struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, and credit costs are rising sharply .
While several Japanese regional bank stocks have risen by double-digits in the last couple of weeks, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  Based on past experience, ‘banking sector consolidation’ as a stock market theme is likely to be very short-lived.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese regional bank stocks.

Japanese Regional Banks:  An Old Chestnut Reappears

Japan

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

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Fukuoka Financial Group (8354 JP)

Japan Banks - TOPIX at July 1990 Levels, Banks' Stock Holdings In Perspective

Japan stock market keeps setting record highs, we should remember that banks have major stock holdings. Stock holdings can be very high relative to...

Daniel Tabbush

Europe, Japan, $ACWI Testing Critical Supports; Rising DXY, Global Sovereign Yields a Major Headwind

Europe $STOXX 50, Japan $TOPIX $Nikkei 225, $ACWI Testing Critical Supports; Rising $DXY, Global Sovereign Yields Remain Major Headwinds for global...

Vermilion Research

Japanese Banks: Buddy, Can We Spare You a Dime !

Cash continues to flow into bank deposits in Japan faster than the banks appear able to channel those funds into loans or investments that might...

J. Brian Waterhouse

Japanese Bank Lending: An Ebb Tide in 2021?

The ‘dash for cash’ by large corporates appears to be over, at least in terms of lending by the major banks. Only the small secondary regionals...

J. Brian Waterhouse

Japanese Regional Banks: An Old Chestnut Reappears

A curious thing happened on Friday. The Japanese Topix Index fell almost 1%, reflecting overnight weakness on Wall Street, but the banking sector...

J. Brian Waterhouse

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