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.

Equity Bottom-Up

China Merchants Bank A / Equity Bottom-Up

<ul>
<li>New results detail from CMB shows divergence with credit quality and actual credit costs</li>
<li>The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY</li>
<li>Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total</li>
</ul>


New results detail from CMB shows divergence with credit quality and actual credit costs
The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total


China Merchants Bank - New Results: Property Dev. NPLs at 5.5% from 4.1%...  25% Lower Credit Costs

Thematic (Sector/Industry)

<ul>
<li>Notes to financial statements show rampant deterioration in credit metrics for both banks</li>
<li>BEA's write-offs in property development impaired loans rise by 4.1x in 1H23 vs FY22
</li>
<li>Overdue loans by &gt;1yr rose 277% HoH in 1H23 at Dah Sing, but it cut credit costs 48%
</li>
</ul>


Notes to financial statements show rampant deterioration in credit metrics for both banks
BEA's write-offs in property development impaired loans rise by 4.1x in 1H23 vs FY22

Overdue loans by &gt;1yr rose 277% HoH in 1H23 at Dah Sing, but it cut credit costs 48%



BEA & Dah Sing - Rampant Deterioration in HK Credit Metrics, Not Totally Visible in Headline Results

Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

Asia biased macro & technical analysis

A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

Technical Analysis

Country Garden Holdings Co / Technical Analysis

<ul><li>The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main drivers of the continued rally early in the week.</li><li>What has been very different in this rally is the robust Southbound Inflows indicating strong interest from mainland investors but (yes, there is always one) it does not tie up the sharp rise in short-end HIBOR.</li><li>The HIBOR rise could be due to the drawdown of the large-margin loan in support of this rally. I have not found data to support or rebuff such a thesis.</li></ul>

The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main drivers of the continued rally early in the week.What has been very different in this rally is the robust Southbound Inflows indicating strong interest from mainland investors but (yes, there is always one) it does not tie up the sharp rise in short-end HIBOR.The HIBOR rise could be due to the drawdown of the large-margin loan in support of this rally. I have not found data to support or rebuff such a thesis.

HIBOR, Country Garden, Meituan, Tencent, and HSBC

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0128/2022012800929.pdf" target="_blank" rel="noopener">announced</a> last Friday it intends to buy back 8.43% of shares out from Elliott Investment Management for HK$2.9bn ($373mn), paying HK$11.19/share.</li>
<li>The share buyback is expected to result in a 6% increase in the consolidated net asset value per share.</li>
<li>Conditions to the buyback appear straightforward. BEA is trading cheap at 0.3x P/B. </li>
</ul>



Bank of East Asia (23 HK) announced last Friday it intends to buy back 8.43% of shares out from Elliott Investment Management for HK$2.9bn ($373mn), paying HK$11.19/share.
The share buyback is expected to result in a 6% increase in the consolidated net asset value per share.
Conditions to the buyback appear straightforward. BEA is trading cheap at 0.3x P/B. 


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

*Results Better Than Expected: Bank of East Asia (23.HK) [BEA] reported 1H21 results of HKD 2.3 bn – improving HKD 579 mn (34.3%) HOH despite a tax rate of 14.9% (negative 6.8% in 2H20). Results were supported by both a reduced loss provision and net interest income improvement; and  *Credit Turn, But Premature Provision Cut:  By our analysis, we find that credit deterioration appears to be decelerating as net new NPLs have increased 29.3% on an annualized basis versus over 60% at 2H20. Assuming that the decelerated breakdown in credit at BEA holds, we find that loss reserves remain wanting by HKD 4.5 bn or nearly one year of bottom-line results.

*Results Better Than Expected: Bank of East Asia (23.HK) [BEA] reported 1H21 results of HKD 2.3 bn – improving HKD 579 mn (34.3%) HOH despite a tax rate of 14.9% (negative 6.8% in 2H20). Results were supported by both a reduced loss provision and net interest income improvement; and  *Credit Turn, But Premature Provision Cut:  By our analysis, we find that credit deterioration appears to be decelerating as net new NPLs have increased 29.3% on an annualized basis versus over 60% at 2H20. Assuming that the decelerated breakdown in credit at BEA holds, we find that loss reserves remain wanting by HKD 4.5 bn or nearly one year of bottom-line results. 

Bank of East Asia – Premature Provision Cut

Hong Kong

Dah Sing Banking Group Limited, through its subsidiaries, provides personal banking, commercial banking, and treasury services.  The Group's operations are primarily based in Hong Kong.

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Dah Sing Banking (2356 HK)

China Merchants Bank - New Results: Property Dev. NPLs at 5.5% from 4.1%... 25% Lower Credit Costs

CMB shows surging property development NPLs, and overdue loans by 1-3 years, which is completely at odds with its 25% lower provision expenses in...

Daniel Tabbush

BEA & Dah Sing - Rampant Deterioration in HK Credit Metrics, Not Totally Visible in Headline Results

Credit metrics worsening substantially at BEA and Dah Sing, and well beyond what is visible in headline figures. There are implications also for...

Daniel Tabbush

HIBOR, Country Garden, Meituan, Tencent, and HSBC

The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main...

Untying The Gordian Knot

What Now For BEA After Elliott Walks?

This buyback removes a significant long-term overhang. At the current price, BEA is simply inexpensive. I'd be picking up shares around these levels.

David Blennerhassett

Bank of East Asia – Premature Provision Cut

BANK OF EAST ASIA: BEA reported 1H21 HOH results improvement of 34.3% supported by both a reduced loss provision and net interest income...

Thomas J. Monaco

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