Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

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Thematic (Sector/Industry)

In this presentation, we present a series of data visualisations to back up 10 bold predictions we expect to play out in China over the next 10 years.Our predictions are based on three basic assumptions:<ol><li>Demographic: China is aging and its workforce is shrinking.</li><li>Economic: China will rebalance.</li><li>Political: Beijing values stability and control above all else.</li></ol>Analyst: Daniel Rohr, CFA

In this presentation, we present a series of data visualisations to back up 10 bold predictions we expect to play out in China over the next 10 years.Our predictions are based on three basic assumptions:Demographic: China is aging and its workforce is shrinking.Economic: China will rebalance.Political: Beijing values stability and control above all else.Analyst: Daniel Rohr, CFA

Outlook for China:10 Predictions for the Next 10 Years

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.

<ul>
<li>There is a new proposal from BIS that is seeking to change the way banks calculate their operational risk. </li>
<li>The concern they have is the current method is too simplistic and fundamentally flawed. Of course it is; it is simply a percentage based on gross revenue.  
</li>
<li>Operational risk is all about processes, systems and internal controls. While we may not know exactly how any new calculation will look, what is telling is how three China banks compare with three Australian banks.</li>
<li>Is it even in the realm…</li>
</ul>


There is a new proposal from BIS that is seeking to change the way banks calculate their operational risk. 
The concern they have is the current method is too simplistic and fundamentally flawed. Of course it is; it is simply a percentage based on gross revenue.  

Operational risk is all about processes, systems and internal controls. While we may not know exactly how any new calculation will look, what is telling is how three China banks compare with three Australian banks.
Is it even in the realm…


New BIS Proposal on Operational Risk, Comparing China to Australia

Equity Bottom-Up

<ul><li>We tend to focus on loan risk as the most critical for banks. </li><li>And this is generally correct across most of Asia.  Even in Japan it is the correct way to consider impairment risk, where most other assets for Japan’s banks are Japanese Government Bonds.</li><li>But in China, beware.  </li><li>There are plenty of loan-like risks classified as investments. We start with a look at Harbin Bank.</li></ul>

We tend to focus on loan risk as the most critical for banks. And this is generally correct across most of Asia.  Even in Japan it is the correct way to consider impairment risk, where most other assets for Japan’s banks are Japanese Government Bonds.But in China, beware.  There are plenty of loan-like risks classified as investments. We start with a look at Harbin Bank.

Loans Are Not the Only Asset Risk for China Banks

It is still difficult to digest the optimism in some commentary regarding true underlying financial health. Adding to the regime of onerous banking regulations is an environment of economic and financial fear. The decline in U.S. 10 year bond yields this year alone is testimony to this. Negative interest rates in Japan, EU, and Sweden, suggests the growth outlook is terrible.Remember when the world was waiting for rising U.S. rates and normalization of higher rates globally? This was when the world’s overly liquid banks would start to print money; earning an immediately higher spread on their excess deposits. It is not happening. It is more like the opposite now.

It is still difficult to digest the optimism in some commentary regarding true underlying financial health. Adding to the regime of onerous banking regulations is an environment of economic and financial fear. The decline in U.S. 10 year bond yields this year alone is testimony to this. Negative interest rates in Japan, EU, and Sweden, suggests the growth outlook is terrible.Remember when the world was waiting for rising U.S. rates and normalization of higher rates globally? This was when the world’s overly liquid banks would start to print money; earning an immediately higher spread on their excess deposits. It is not happening. It is more like the opposite now.

Risks regarding bill-financing business have recently become a new source of concern for Chinese banks.  Bill-financing frauds seen at both the Agricultural Bank of China, or ABC, and China Citic Bank, or Citic, indicate high operational risks.Since late 2015, the China Banking Regulatory Commission has been strengthening controls by identifying violations, including fraudulent transactions, the use of financing to inflate deposits and loans, and adjustments intended to lower capital charges.  We expect this to negatively affect certain banks with relatively heavy business exposures, including ABC, China Minsheng Bank, or CMBC, and Citic.Analyst: Iris Tan, CFA

Risks regarding bill-financing business have recently become a new source of concern for Chinese banks.  Bill-financing frauds seen at both the Agricultural Bank of China, or ABC, and China Citic Bank, or Citic, indicate high operational risks.Since late 2015, the China Banking Regulatory Commission has been strengthening controls by identifying violations, including fraudulent transactions, the use of financing to inflate deposits and loans, and adjustments intended to lower capital charges.  We expect this to negatively affect certain banks with relatively heavy business exposures, including ABC, China Minsheng Bank, or CMBC, and Citic.Analyst: Iris Tan, CFA 

Tightened Regulations on China's Bill Financing Pose NIM Pressures for Certain Banks

China

Bank of Beijing Company Ltd. attracts deposits and offers commercial banking services.  The Bank offers short-, medium- and long-term loans, insurance, foreign exchange, international settlement, government bonds, and other products and services.

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Bank Of Beijing Co Ltd A (601169 CH)

Outlook for China:10 Predictions for the Next 10 Years

In this presentation, we present a series of data visualisations to back up 10 bold predictions we expect to play out in China over the next 10...

Morningstar, Inc.

New BIS Proposal on Operational Risk, Comparing China to Australia

There is a new proposal from BIS that is seeking to change the way banks calculate their operational risk. The concern they have is the current...

Daniel Tabbush

Loans Are Not the Only Asset Risk for China Banks

We tend to focus on loan risk as the most critical for banks. And this is generally correct across most of Asia. Even in Japan it is the correct...

Daniel Tabbush

Asian Banks – Risks Remain Plentiful

It is still difficult to digest the optimism in some commentary regarding true underlying financial health. Adding to the regime of onerous banking...

Daniel Tabbush

Tightened Regulations on China's Bill Financing Pose NIM Pressures for Certain Banks

Risks regarding bill-financing business have recently become a new source of concern for Chinese banks. Bill-financing frauds seen at both the...

Morningstar, Inc.

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