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)

There have been several false starts. There were times when many presumed the bad loan cycle was about to end. It could have been with the PSU bank recap plan. It could have been with a new government budget. It could have been with new guidelines on stressed assets. But the reality is that without fundamental relief to debtors, without improving economic growth,  credit metrics should continue to deteriorate. Now at 3Q20 it is once again clear, that there is as yet, no relief in sight.

There have been several false starts. There were times when many presumed the bad loan cycle was about to end. It could have been with the PSU bank recap plan. It could have been with a new government budget. It could have been with new guidelines on stressed assets. But the reality is that without fundamental relief to debtors, without improving economic growth,  credit metrics should continue to deteriorate. Now at 3Q20 it is once again clear, that there is as yet, no relief in sight.

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

Equity Bottom-Up

Edelweiss Financial Services / Equity Bottom-Up

<ul>
<li>Weak Edelweiss Result:Edelweiss Financial Services (EDEL.IN) [Edelweiss] reported earnings of INR 170 mn for FY 3Q20, a 67% and 92% linked quarter and YOY decline. Loan loss provisions were substantially higher, the agency business exhibited lower profits, and larger insurance and BMU losses all contributed to this disastrous result.</li>
<li>FY 4Q20 Should Be Special As Well: Edelweiss intends to complete a detailed review of its corporate loan book in FY 4Q20 and will update its Expected Credit Loss (ECL) model. If the organization is honest with itself, we'd anticipate a far greater level of NPLs next quarter. </li>
</ul>


Weak Edelweiss Result:Edelweiss Financial Services (EDEL.IN) [Edelweiss] reported earnings of INR 170 mn for FY 3Q20, a 67% and 92% linked quarter and YOY decline. Loan loss provisions were substantially higher, the agency business exhibited lower profits, and larger insurance and BMU losses all contributed to this disastrous result.
FY 4Q20 Should Be Special As Well: Edelweiss intends to complete a detailed review of its corporate loan book in FY 4Q20 and will update its Expected Credit Loss (ECL) model. If the organization is honest with itself, we'd anticipate a far greater level of NPLs next quarter. 


Edelweiss Financial Services - Train Wreck

<div><ul><li>
Regulatory Forbearance for Real Estate Developers: Although we await the final guidelines, the RBI is permitting the commercial operations of real estate developer loans for residential and commercial properties to continue to be extended by a year. </li></ul></div><div><ul>
<li>
Cash Reserve Ratio Cut:The RBI is also allowing commercial banks to deduct any incremental disbursements for auto, home loans, and MSMEs, from the calculation of their net demand and time liabilities for the purposes of maintaining CRR.</li>
<li>
Creation of Long-term Repo Window:The RBI has created a one/three-year repo window for second tier banks to borrow at a policy rate of up to INR 1 tn. </li>
</ul></div>


Regulatory Forbearance for Real Estate Developers: Although we await the final guidelines, the RBI is permitting the commercial operations of real estate developer loans for residential and commercial properties to continue to be extended by a year. 

Cash Reserve Ratio Cut:The RBI is also allowing commercial banks to deduct any incremental disbursements for auto, home loans, and MSMEs, from the calculation of their net demand and time liabilities for the purposes of maintaining CRR.

Creation of Long-term Repo Window:The RBI has created a one/three-year repo window for second tier banks to borrow at a policy rate of up to INR 1 tn. 


RBI - Desperate Times Call For Desperate Measures

<ul>
<li>
Weak Result Even Without Fraud Charge:Punjab National Bank (PNB.IN) [Punjab] reported a net loss of INR 4.9 bn, as a result of weak core pre-provision operating income and substantial loan loss provisions. Results would have been worse if Punjab didn't defer INR 16 bn in fraud-related provisions. </li>
<li>
Another Fraud ID'd: During FY 2Q20, Punjab also identified additional fraud activity - taking an INR 0.6 bn provisions with respect to these "identified" accounts. Punjab has deferred the remaining INT 1.8 bn in new fraud charges. </li>
</ul>



Weak Result Even Without Fraud Charge:Punjab National Bank (PNB.IN) [Punjab] reported a net loss of INR 4.9 bn, as a result of weak core pre-provision operating income and substantial loan loss provisions. Results would have been worse if Punjab didn't defer INR 16 bn in fraud-related provisions. 

Another Fraud ID'd: During FY 2Q20, Punjab also identified additional fraud activity - taking an INR 0.6 bn provisions with respect to these "identified" accounts. Punjab has deferred the remaining INT 1.8 bn in new fraud charges. 


We all consider the NPL crisis in India as almost exclusively corporate loans. We may consider the origin even more narrowly with infrastructure loans. It would be a mistake to presume that home loans are fully safe. Economic malaise can work through a system, moving from one segment to another. Where economic malaise worsens and persists, this is more likely. New numbers of <a href="https://www.smartkarma.com/entities/lic-housing-finance-ltd" target="_blank" data-smartkarma-citation="entities:15667:1" rel="noopener">LIC Housing Finance (LICHF IN)</a> show all too clearly that housing lending is not without risk, and that risk appears to be worsening dramatically.

We all consider the NPL crisis in India as almost exclusively corporate loans. We may consider the origin even more narrowly with infrastructure loans. It would be a mistake to presume that home loans are fully safe. Economic malaise can work through a system, moving from one segment to another. Where economic malaise worsens and persists, this is more likely. New numbers of LIC Housing Finance (LICHF IN) show all too clearly that housing lending is not without risk, and that risk appears to be worsening dramatically.

India

LIC Housing Finance Limited provides housing finance services to individuals for purchase, construction, repair and renovation of new or existing flats and houses. The Company also provides finance on existing property for business, personal needs and gives loans to professionals for purchase, construction of clinics, nursing homes, diagnostic centers, and office space throughout India.

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LIC Housing Finance (LICHF IN)

India Banks – No End in Sight

There have been several false starts. There were times when many presumed the bad loan cycle was about to end. It could have been with the PSU bank...

Daniel Tabbush

Edelweiss Financial Services - Train Wreck

Weak Edelweiss Result:Edelweiss Financial Services (EDEL.IN) [Edelweiss] reported earnings of INR 170 mn for FY 3Q20, a 67% and 92% linked quarter...

Thomas J. Monaco

RBI - Desperate Times Call For Desperate Measures

Regulatory Forbearance for Real Estate Developers: Although we await the final guidelines, the RBI is permitting the commercial operations of real...

Thomas J. Monaco

Punjab National Bank - Pure Filth

Weak Result Even Without Fraud Charge:Punjab National Bank (PNB.IN) [Punjab] reported a net loss of INR 4.9 bn, as a result of weak core...

Thomas J. Monaco

LIC Housing – A House of Cards?

We all consider the NPL crisis in India as almost exclusively corporate loans. We may consider the origin even more narrowly with infrastructure...

Daniel Tabbush

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