Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

With interest rates beginning to rise worldwide, more and more attention is being paid to banking stocks. In Japan, it has been said that banks are a sector with a strong sense of horizontal alignment. In this article, I will consider the corporate governance aspects of bank stocks. 72 banks are included in the 1,709 companies in the Metrical Universe as of September 2021. The table below shows the median and mean metrics for the 72 banks in the metrical universe, including ROE, ROA, Tobin's Q, and the Metrical Score, a measure of corporate governance, and one component of the Metrical Score, the percentage of total board members who are independent directors.

With interest rates beginning to rise worldwide, more and more attention is being paid to banking stocks. In Japan, it has been said that banks are a sector with a strong sense of horizontal alignment. In this article, I will consider the corporate governance aspects of bank stocks. 72 banks are included in the 1,709 companies in the Metrical Universe as of September 2021. The table below shows the median and mean metrics for the 72 banks in the metrical universe, including ROE, ROA, Tobin's Q, and the Metrical Score, a measure of corporate governance, and one component of the Metrical Score, the percentage of total board members who are independent directors.

Japan's Governance: Considerations for Bank Stocks

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

US markets saw a sharp drop yesterday, continuing its volatile movement from last week – S&amp;P and Nasdaq were down 1.3% and 2.4% respectively. US 10Y Treasury yields were marginally higher by 1bp to 1.48%. Energy and Utilities were up over 1.4% while IT and Communication Services were down over 2.1%. European stocks were also lower with the DAX falling 0.8%, CAC falling 0.6% and FTSE down 0.2%. Brazil’s Bovespa was down sharply by 2.2%. In the Middle East, UAE’s ADX was down 0.3% and Saudi TASI was up 0.1%. Asia Pacific markets are broadly lower again – STI is down 0.8% and Nikkei 2.8% while Shanghai remains closed, HSI recovered after opening ~1% lower and was up 0.3%,. US IG CDS spreads were 0.95bp wider while HY CDX spreads widened 4.7bp. EU Main CDS spreads were 0.9bp wider and Crossover CDS spreads widened 5bp. Asia ex-Japan CDS spreads widened 0.1bp.

HDB, MUFG Launch Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our biggest concerns have stemmed from a handful of large-cap China internet names, which have held back the MSCI EM and Hang Seng indexes. We are also getting a breakout above $93.50-93.75 on the US dollar, a concerning risk-off signal. Still, our list of concerns remains short, and our outlook remains neutral yet constructive overall.

Our biggest concerns have stemmed from a handful of large-cap China internet names, which have held back the MSCI EM and Hang Seng indexes. We are also getting a breakout above $93.50-93.75 on the US dollar, a concerning risk-off signal. Still, our list of concerns remains short, and our outlook remains neutral yet constructive overall.

Global Cyclical Value Sectors Improving -- Buying Financials and Energy Names: ING Groep, Many More

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

Mizuho Financial Group / Equity Bottom-Up

The last day of September.  The end of the first half of the financial year.  A particularly busy day for bankers, with a surge in banking transactions as customers close out the half-year.  The FSA breathing down your neck for the multiple systems failures you have already had this year.  The last thing you need on this day is another systems failure.  But that is exactly what happened yesterday afternoon.  That makes eight straight systems failures since February 2021 for Mizuho Bank and the embattled management team of <a href="https://www.smartkarma.com/entities/mizuho-financial-group-inc" target="_blank" data-smartkarma-citation="entities:219:1" rel="noopener">Mizuho Financial Group (8411 JP)</a>, the latest mishap coming only one week after the FSA issued a Business Correction Order to the bank and the holding company in respect of the previous systems failures.  Mizuho’s reputation with the financial authorities will not have been enhanced by this latest revelation.Caveat Emptor! (May the Buyer Beware!) remains our advice to would-be investors in this enormous but problematic banking group.

The last day of September.  The end of the first half of the financial year.  A particularly busy day for bankers, with a surge in banking transactions as customers close out the half-year.  The FSA breathing down your neck for the multiple systems failures you have already had this year.  The last thing you need on this day is another systems failure.  But that is exactly what happened yesterday afternoon.  That makes eight straight systems failures since February 2021 for Mizuho Bank and the embattled management team of Mizuho Financial Group (8411 JP), the latest mishap coming only one week after the FSA issued a Business Correction Order to the bank and the holding company in respect of the previous systems failures.  Mizuho’s reputation with the financial authorities will not have been enhanced by this latest revelation.Caveat Emptor! (May the Buyer Beware!) remains our advice to would-be investors in this enormous but problematic banking group.

Mizuho Financial Group (8411 JP):  Straight Eight

Thematic (Sector/Industry)

Loan data for August 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for all Japanese commercial banks is now in negative territory, driven by a sharp YoY decline in lending by the major banks over the last four months.  Even on a month-on-month basis, total lending by Japanese banks has been falling for four out of the last five months.  Credit lines that were drawn down in 2020 as Japan went into nationwide COVID-induced lockdown, but were ultimately largely unneeded, are now being repaid.Interest rates remain at rock bottom, a fact that helps minimize funding costs, while the recovery in the stock market has given the banks some valuable ‘breathing space’ to offset rising credit costs with gains on selling some of the investment portfolio.  Nevertheless, margins remain under intense pressure, pushing core earnings down.  The quality of bank profits therefore continues to deteriorate, even though bottom-line profits for 1H FY3/2022 are likely to exceed most banks’ cautious initial earnings guidance.  That said, we expect few banks to opt to raise their full-year guidance significantly, regardless of 1H FY3/2022 results (due out mid-November).The Japanese banking sector in 2021 has outperformed Topix for the first time in several years, aided by a weakening Yen against the US$.  Yet, as we head into the third quarter of FY3/2022, much of the earlier outperformance by the banking sector against Topix has already been given back.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/501/original/8300-WR-JBanks-2021-0719-TooLow4Zero-TPNBNKvsTPX+2015-2021.jpg?1632884040" class="editor-image img-responsive" data-smartkarma-image-id="232501"></figure></section>

Loan data for August 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for all Japanese commercial banks is now in negative territory, driven by a sharp YoY decline in lending by the major banks over the last four months.  Even on a month-on-month basis, total lending by Japanese banks has been falling for four out of the last five months.  Credit lines that were drawn down in 2020 as Japan went into nationwide COVID-induced lockdown, but were ultimately largely unneeded, are now being repaid.Interest rates remain at rock bottom, a fact that helps minimize funding costs, while the recovery in the stock market has given the banks some valuable ‘breathing space’ to offset rising credit costs with gains on selling some of the investment portfolio.  Nevertheless, margins remain under intense pressure, pushing core earnings down.  The quality of bank profits therefore continues to deteriorate, even though bottom-line profits for 1H FY3/2022 are likely to exceed most banks’ cautious initial earnings guidance.  That said, we expect few banks to opt to raise their full-year guidance significantly, regardless of 1H FY3/2022 results (due out mid-November).The Japanese banking sector in 2021 has outperformed Topix for the first time in several years, aided by a weakening Yen against the US$.  Yet, as we head into the third quarter of FY3/2022, much of the earlier outperformance by the banking sector against Topix has already been given back.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Japanese Bank Lending:  Too Low For Zero

Japan

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

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Mitsubishi UFJ Financial (MUFG) (8306 JP)

Japan's Governance: Considerations for Bank Stocks

Although the bank sector is said to be highly lopsided, Metrical Score of the 72 banks is diversified. On the other hand, there is no significant...

Metrical Inc

HDB, MUFG Launch Bonds; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

US markets saw a sharp drop yesterday, continuing its volatile movement from last week – S&P and Nasdaq were down 1.3% and 2.4% respectively....

BondEvalue

Global Cyclical Value Sectors Improving -- Buying Financials and Energy Names: ING Groep, Many More

Continued rising rates is likely to support value Sectors moving forward (especially Financials and Energy), and it also typically indicates...

Vermilion Research

Mizuho Financial Group (8411 JP): Straight Eight

With the FSA breathing down Mizuho's neck for the multiple systems failures already this year, the last thing the bank needed was another one. But...

J. Brian Waterhouse

Japanese Bank Lending: Too Low For Zero

Data for August 2021 from both the JBA and the BoJ confirm that YoY loan growth for all Japanese commercial banks has turned negative, driven by a...

J. Brian Waterhouse

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