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)

While economic recovery data may be clearest, we look to US banks’ C19 loan modifications. Most banks globally term these loans as deferral loans, and they are a new feature of banks’ balance sheets from the government actions taken early in this year. Modified loans or reschedule loans have narrowed dramatically in the most recent quarter, suggesting that the degree of stress is not worsening, and quite the contrary.

While economic recovery data may be clearest, we look to US banks’ C19 loan modifications. Most banks globally term these loans as deferral loans, and they are a new feature of banks’ balance sheets from the government actions taken early in this year. Modified loans or reschedule loans have narrowed dramatically in the most recent quarter, suggesting that the degree of stress is not worsening, and quite the contrary.

The main lever for US banks and others is credit costs. This is clear in data during the three quarters thus far this year. After the closing of economies credit costs soared and with the re-opening they have collapsed. But operationally US banks can also benefit from the steepening yield curve. The spread of 10-year US Treasuries over 1-year paper continues to expand. With vaccines, the Biden win and a better understanding of the cost-benefit on how governments reacted early this year, there is likely more risk of the yield curve remaining steep.

The main lever for US banks and others is credit costs. This is clear in data during the three quarters thus far this year. After the closing of economies credit costs soared and with the re-opening they have collapsed. But operationally US banks can also benefit from the steepening yield curve. The spread of 10-year US Treasuries over 1-year paper continues to expand. With vaccines, the Biden win and a better understanding of the cost-benefit on how governments reacted early this year, there is likely more risk of the yield curve remaining steep.

The news of a C19 vaccine is a discrete variable that can affect how banks assess credit risk. With a vaccine there is less risk of economic shutdown, less risk of worsening consumption, and less risk of more unemployment. All of this must mean better statistics for probability of default (PD) and loss given default (LGD). At the same time, the US President-elect is talking about a ‘dark winter’ and urging mass mask-wearing. This comes as many European countries re-shutdown their economies at least to some degree. Banks will be hard-pressed to not view the Biden comments and actions from European countries as negative for credit metrics. This can mean a messy and moving set of credit risk assumptions for banks, making the path forward that much more difficult to ascertain.

The news of a C19 vaccine is a discrete variable that can affect how banks assess credit risk. With a vaccine there is less risk of economic shutdown, less risk of worsening consumption, and less risk of more unemployment. All of this must mean better statistics for probability of default (PD) and loss given default (LGD). At the same time, the US President-elect is talking about a ‘dark winter’ and urging mass mask-wearing. This comes as many European countries re-shutdown their economies at least to some degree. Banks will be hard-pressed to not view the Biden comments and actions from European countries as negative for credit metrics. This can mean a messy and moving set of credit risk assumptions for banks, making the path forward that much more difficult to ascertain.

China Banks – Biden, Vaccine, Provisions

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Performance between US Value funds and Aggressive Growth funds has diverged over the last decade, with 2020 seeing an acceleration of the trend.</li>
<li>The difference in performance is down to their vastly different portfolios, with Value funds heavily reliant on Financials and Health Care stocks and Aggressive Growth funds heavily exposed to Tech and Communication Services. </li>
<li>However, there is some overlap.  There are a number of stocks that appear to offer something for both Value and Growth investors, including <a href="https://www.smartkarma.com/entities/visa-inc-class-a-shares" target="_blank" data-smartkarma-citation="entities:8707:1" rel="noopener">Visa Inc Class A Shares (V US)</a>, <a href="https://www.smartkarma.com/entities/lowe-s-companies-inc" target="_blank" data-smartkarma-citation="entities:4156:1" rel="noopener">Lowe's Companies Inc (LOW US)</a> and <a href="https://www.smartkarma.com/entities/schwab-charles-corp" target="_blank" data-smartkarma-citation="entities:13610:1" rel="noopener">Schwab (Charles) (SCHW US)</a> </li>
<li>In this analysis, we explore a portfolio that combines stocks that are owned by more than 10% of both the Value funds and Aggressive Growth funds in our analysis.  </li>
</ul>


Performance between US Value funds and Aggressive Growth funds has diverged over the last decade, with 2020 seeing an acceleration of the trend.
The difference in performance is down to their vastly different portfolios, with Value funds heavily reliant on Financials and Health Care stocks and Aggressive Growth funds heavily exposed to Tech and Communication Services. 
However, there is some overlap.  There are a number of stocks that appear to offer something for both Value and Growth investors, including Visa Inc Class A Shares (V US), Lowe's Companies Inc (LOW US) and Schwab (Charles) (SCHW US) 
In this analysis, we explore a portfolio that combines stocks that are owned by more than 10% of both the Value funds and Aggressive Growth funds in our analysis.  


US Value Vs Growth:  The Goldilocks Portfolio

There is granular data for US banks on loan modifications due to the economic shutdown as well as Payment Protection Program (PPP) loans. One may presume that banks with a significant amount of the former especially, and potentially the latter too, would enjoy lower credit costs. The reality though may surprise many. For us, we wonder if together with recovery, from a crisis completely unlike others, as we flip the switch back on, if banks with high modifications may be t more positively leveraged?

There is granular data for US banks on loan modifications due to the economic shutdown as well as Payment Protection Program (PPP) loans. One may presume that banks with a significant amount of the former especially, and potentially the latter too, would enjoy lower credit costs. The reality though may surprise many. For us, we wonder if together with recovery, from a crisis completely unlike others, as we flip the switch back on, if banks with high modifications may be t more positively leveraged?

United States

Bank of America Corporation accepts deposits and offers banking, investing, asset management, and other financial and risk-management products and services.  The Company has a mortgage lending subsidiary, and an investment banking and securities brokerage subsidiary.

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Bank Of America (BAC US)

US Banks – Deferral Debt Dwindling

We look to US banks’ C19 loan modifications. Modified loans or reschedule loans have narrowed dramatically, suggesting that the degree of stress is...

Daniel Tabbush

US Banks – Borrow Short, Lend Long

While credit costs will remain a key focus for US banks over the coming quarters, we must not lose sight of the steepening yield curve and what it...

Daniel Tabbush

China Banks – Biden, Vaccine, Provisions

There are conflicting factors at play in assessing banks, including Chinese banks, which will making the path forward that much more difficult to...

Daniel Tabbush

US Value Vs Growth: The Goldilocks Portfolio

Performance between US Value funds andtwo groups has diverged over the last decade, with 2020 seeing an acceleration of the trend.

Steven Holden

US Banks – Loan Modifications

There is granular data for US banks on loan modifications due to the economic shutdown as well as Payment Protection Program (PPP) loans. One may...

Daniel Tabbush

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