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Articles from Caixin Global

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Cross Asset Strategy

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In Depth: What’s worrying regulators about China’s mutual fund boom
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China calls balloon incident a ‘test’ for U.S. to improve relations
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China stock exchanges appoint IPO review committees to clean up listings
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In Depth: What’s worrying regulators about China’s mutual fund boom


China calls balloon incident a ‘test’ for U.S. to improve relations


China stock exchanges appoint IPO review committees to clean up listings



CX Daily: What’s Worrying Regulators About China’s Mutual Fund Boom

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Document 15: Recently the China Bank and Insurance Regulatory Commission (CBIRC) issued guidance to both banks and insurers on implicit debt of local government financing vehicles (LGFV) via Document 15 – tightening the screws even further;  and*No Let Up In Sight: Coupled with the structural reforms of an increase in risk-based capital minimums for certain state banks, the partial bank Wealth Management Product (WMP) resolution, and the recent reserve requirement ratio (RRR) reduction, these tightening measures should act to contain some of the out of control financial risk within the mainland Chinese financial system.

*Document 15: Recently the China Bank and Insurance Regulatory Commission (CBIRC) issued guidance to both banks and insurers on implicit debt of local government financing vehicles (LGFV) via Document 15 – tightening the screws even further;  and*No Let Up In Sight: Coupled with the structural reforms of an increase in risk-based capital minimums for certain state banks, the partial bank Wealth Management Product (WMP) resolution, and the recent reserve requirement ratio (RRR) reduction, these tightening measures should act to contain some of the out of control financial risk within the mainland Chinese financial system.

*D-SIB Standards Released: The People’s Bank of China (PBOC) and China Bank and Insurance Regulatory Commission (CBIRC) on April 2, 2021 released finalized new capital standards for the country’s domestic systemically important banks (D-SIBs), and indicated that the need for banking  crisis liquidation plans; and* Aggressive Capital Raises Expected: In our view, the forthcoming regulations are likely to focus on: additional paid-in capital; leverage ratios; risk concentrations; corporate governance; disclosure levels; and mechanism to prevent systemic risk; and internal controls. The idea is to finally strengthen mainland Chinese bank balance sheets and improve their loss absorption capacity. Problem for equity raises is that P/BV must be over 1.0x for the raise and many of the potential D-SIBs are trading below book value.

*D-SIB Standards Released: The People’s Bank of China (PBOC) and China Bank and Insurance Regulatory Commission (CBIRC) on April 2, 2021 released finalized new capital standards for the country’s domestic systemically important banks (D-SIBs), and indicated that the need for banking  crisis liquidation plans; and* Aggressive Capital Raises Expected: In our view, the forthcoming regulations are likely to focus on: additional paid-in capital; leverage ratios; risk concentrations; corporate governance; disclosure levels; and mechanism to prevent systemic risk; and internal controls. The idea is to finally strengthen mainland Chinese bank balance sheets and improve their loss absorption capacity. Problem for equity raises is that P/BV must be over 1.0x for the raise and many of the potential D-SIBs are trading below book value. 

China Banks – Big Capital Raises Coming

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.

There is little evidence of any major economic shutdown in China during early this year. There is also little evidence of the period when China re-opened its economy only to find most all other economies were closed. It was arguably an especially difficult period for China and its banks. Where many banks have now reported their results, it becomes clearer that the numbers hardly reflect crisis - temporary or otherwise. This though is not what really matters; rather it is the implication for profit delta during 2H20.

There is little evidence of any major economic shutdown in China during early this year. There is also little evidence of the period when China re-opened its economy only to find most all other economies were closed. It was arguably an especially difficult period for China and its banks. Where many banks have now reported their results, it becomes clearer that the numbers hardly reflect crisis - temporary or otherwise. This though is not what really matters; rather it is the implication for profit delta during 2H20.

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this is the first bank closure in 20 years, which is also telling.  Perhaps the reddest of red flags for this bank was its missing financials for the past two years. We find several other China banks without financial statements, suggesting that this bank may not be alone. Beijing has since highlighted its concerns about high levels of special mention loans (SML) which flatter NPLs. We see many banks in China where SML loans are well over 100% of loss NPLs. The risk to higher credit costs is meaningful.  The negative profit growth shown by six of China’s banks during the latest quarter is another sign of how this can play out.

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this is the first bank closure in 20 years, which is also telling.  Perhaps the reddest of red flags for this bank was its missing financials for the past two years. We find several other China banks without financial statements, suggesting that this bank may not be alone. Beijing has since highlighted its concerns about high levels of special mention loans (SML) which flatter NPLs. We see many banks in China where SML loans are well over 100% of loss NPLs. The risk to higher credit costs is meaningful.  The negative profit growth shown by six of China’s banks during the latest quarter is another sign of how this can play out.

China Banks – Missing Financials, Negative Growth, High Special Mention Loans

China

China Zheshang Bank Co., Ltd. is a national joint-stock commercial bank offering a comprehensive range of commercial banking products and services in Mainland China. It operates through Corporate Banking, Retail Banking, and Treasury Business segments, providing services such as loans, deposits, wealth management, and trade financing. The bank officially commenced operations on August 18, 2004, and is headquartered in Hangzhou, China, tracing its roots to Zhejiang Commercial Bank established in 1993.

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China Zheshang Bank (2016 HK)

CX Daily: What’s Worrying Regulators About China’s Mutual Fund Boom

In Depth: What’s worrying regulators about China’s mutual fund boom China calls balloon incident a ‘test’ for U.S. to improve relations China...

Caixin Global

China Banks – Screws Tighten On LGFVs

CHINA BANKS: Recently the CBIRC issued guidance on implicit LGFV debt via Document 15 – further tightening the screws on mainland China's financial...

Thomas J. Monaco

China Banks – Big Capital Raises Coming

CHINA BANKS: The PBOC and CBIRC released finalized new capital standards for the country’s D-SIBs. Equity raises require P/BV over 1.0x and many of...

Thomas J. Monaco

China Banks – Muted Profit Delta

The profile for provision expenses and profits at China's banks during 1H20 is wholly different to many others globally.

Daniel Tabbush

China Banks – Missing Financials, Negative Growth, High Special Mention Loans

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this...

Daniel Tabbush

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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