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)

We all know there will be less trade related lending in the current year. <a href="https://www.smartkarma.com/entities/22" target="_blank" data-smartkarma-citation="entities:22:1">DBS Group Holdings (DBS SP)</a> reported negative growth during 2018.  What we believe may be a surprise to many is the level of trade related loans compared with bank market capitalisation. We look at a few banks across Asia, where data is readily available, and risk appears high at DBS.  As the trade war intensifies and global growth weakens, the risk to banks is several fold including: less loan growth, higher credit costs and lower income delta.  While DBS shows a high level of trade loans, banks in Hong Kong may be even more adversely affected given incredibly low credit costs and NPLs at present, meaning a far greater negative delta during 2019.

We all know there will be less trade related lending in the current year. DBS Group Holdings (DBS SP) reported negative growth during 2018.  What we believe may be a surprise to many is the level of trade related loans compared with bank market capitalisation. We look at a few banks across Asia, where data is readily available, and risk appears high at DBS.  As the trade war intensifies and global growth weakens, the risk to banks is several fold including: less loan growth, higher credit costs and lower income delta.  While DBS shows a high level of trade loans, banks in Hong Kong may be even more adversely affected given incredibly low credit costs and NPLs at present, meaning a far greater negative delta during 2019.

Banks – Trade Loans At DBS Are Sizeable, But Risks Also For HK Banks

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>I see <a href="https://www.smartkarma.com/entities/guoco-group-ltd" target="_blank" data-smartkarma-citation="entities:5290:1" rel="noopener">Guoco Group Ltd (53 HK)</a>'s implied stub at around a decade low. And a trailing P/B of 0.34x, versus the five-year average of 0.4x. </li>
<li>~67%-Held <a href="https://www.smartkarma.com/entities/guocoland-ltd" target="_blank" data-smartkarma-citation="entities:17467:1" rel="noopener">GuocoLand (GUOL SP)</a> (trading at 0.64x P/B) looks set to privatise ~68%-held <a href="https://www.smartkarma.com/entities/guocoland-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:16496:1" rel="noopener">Guocoland Malaysia (GUOL MK)</a> at ~0.55x P/B, further adding to Guoco's look-through "cheapness". </li>
<li>It's coming up to eight years since the Quek family last attempted to take Guoco private. I can see the family stepping up here.</li>
</ul>


I see Guoco Group Ltd (53 HK)'s implied stub at around a decade low. And a trailing P/B of 0.34x, versus the five-year average of 0.4x. 
~67%-Held GuocoLand (GUOL SP) (trading at 0.64x P/B) looks set to privatise ~68%-held Guocoland Malaysia (GUOL MK) at ~0.55x P/B, further adding to Guoco's look-through "cheapness". 
It's coming up to eight years since the Quek family last attempted to take Guoco private. I can see the family stepping up here.


Guoco (53 HK): Still Deep Value. Still Illiquid

Hong Kong’s banks have exposure to China. Some more than others. There are signs of worsening credit conditions in China from some of Hong Kong banks’ financials. We believe this may be as good as any indicator for China credit risk, even where non-performing loan (NPL) ratios appear static in the Mainland. At the same time, some banks in Hong Kong are seeing high rates of growth in domestic impaired loans, provision costs or overdue loans. With less support from China, it is no wonder that…

Hong Kong’s banks have exposure to China. Some more than others. There are signs of worsening credit conditions in China from some of Hong Kong banks’ financials. We believe this may be as good as any indicator for China credit risk, even where non-performing loan (NPL) ratios appear static in the Mainland. At the same time, some banks in Hong Kong are seeing high rates of growth in domestic impaired loans, provision costs or overdue loans. With less support from China, it is no wonder that…

It is not clear to us how a EUR7 billion capital raising will allow Banco Santander (SAN) to clean up Banco Popular (POP), which it has just announced to buy.  This is because POP had EUR19 billion of impaired loans as at 1Q17 compared with equity of EUR11 billion. In any case what is especially of interest to us, are statements from SAN on improving non-performing loan cover to 69% from a low 45%. While there are no listed banks in Asia-Pacific that have the same magnitude of impaired loans as…

It is not clear to us how a EUR7 billion capital raising will allow Banco Santander (SAN) to clean up Banco Popular (POP), which it has just announced to buy.  This is because POP had EUR19 billion of impaired loans as at 1Q17 compared with equity of EUR11 billion. In any case what is especially of interest to us, are statements from SAN on improving non-performing loan cover to 69% from a low 45%. While there are no listed banks in Asia-Pacific that have the same magnitude of impaired loans as…

With SAN Purchase of POP, We Look at Impaired Loans and Deposit Contraction Globally

Independent Insight Provider

Stewart Paterson

Taurus Advisors LLP

Macroeconomics

King Cnute (995-1035) is largely recognized as one of the most effective of kings in the Anglo-Saxon period. His name is most often associated with his commanding the sea to retreat and ending up with wet feet. The tide, it turned out, would obey none, not even a successful King and empire builder. The story is often represented as one of human folly and hubris. The power- mad ruler who thought he could command nature. In fact the reverse is true. Cnut was specifically setting out to teach his…

King Cnute (995-1035) is largely recognized as one of the most effective of kings in the Anglo-Saxon period. His name is most often associated with his commanding the sea to retreat and ending up with wet feet. The tide, it turned out, would obey none, not even a successful King and empire builder. The story is often represented as one of human folly and hubris. The power- mad ruler who thought he could command nature. In fact the reverse is true. Cnut was specifically setting out to teach his…

Hong Kong

The Bank of East Asia (BEA) is a Hong Kong-based financial services group offering comprehensive wholesale banking, personal banking, wealth management, and investment services. Its products include accounts, loans, credit cards, trade finance, and insurance. BEA was incorporated in 1918 and is headquartered in Central, Hong Kong.

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Bank of East Asia (23 HK)

Banks – Trade Loans At DBS Are Sizeable, But Risks Also For HK Banks

We all know there will be less trade related lending in the current year. DBS Group Holdings (DBS SP) reported negative growth during 2018. What...

Daniel Tabbush

Guoco (53 HK): Still Deep Value. Still Illiquid

Guoco remains a potential privatisation play; and/or a deep value play. I see the implied stub - net of the key listcos - around a decade low. The...

David Blennerhassett

HK Banks - Domestic Decay, And China Too

Hong Kong’s banks have exposure to China. Some more than others. There are signs of worsening credit conditions in China from some of Hong Kong...

Daniel Tabbush

With SAN Purchase of POP, We Look at Impaired Loans and Deposit Contraction Globally

It is not clear to us how a EUR7 billion capital raising will allow Banco Santander (SAN) to clean up Banco Popular (POP), which it has just...

Daniel Tabbush

Money Matters: King Cnut and the PBOC.

King Cnute (995-1035) is largely recognized as one of the most effective of kings in the Anglo-Saxon period. His name is most often associated with...

Stewart Paterson

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