Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

The lending ‘boom’, caused by Japanese corporates rushing to secure lines of credit in anticipation of extended nationwide ‘lock-downs’ to counteract the spread of the coronavirus in Japan, is largely over.  Data for April 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for Japanese commercial banks is falling sharply back to previous mean levels of 2%-3% after peaking at +6.9% YoY in July 2020.January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  As often happens once mid-March is reached, the bank sector then sharply underperformed for the next six weeks, only to rally once again through May.  However, trees do not grow to Heaven, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Although the Japanese bank sector is still up some +16% over Topix for CY2021, we note that the sector has once again started to underperform Topix over the past week. Reverting to the mean is an uninspiring development when it comes to Japanese bank stock performance, as the graph at the end of this Insight clearly shows.“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/000/210/200/original/JBanks-2021-0531-TPNBNKvsTPX-2021.jpg?1622450797" class="editor-image img-responsive" data-smartkarma-image-id="210200"></figure></section>

The lending ‘boom’, caused by Japanese corporates rushing to secure lines of credit in anticipation of extended nationwide ‘lock-downs’ to counteract the spread of the coronavirus in Japan, is largely over.  Data for April 2021 from both the Japanese Bankers Association (JBA) and the Bank of Japan (BoJ) confirm that YoY loan growth for Japanese commercial banks is falling sharply back to previous mean levels of 2%-3% after peaking at +6.9% YoY in July 2020.January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  As often happens once mid-March is reached, the bank sector then sharply underperformed for the next six weeks, only to rally once again through May.  However, trees do not grow to Heaven, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Although the Japanese bank sector is still up some +16% over Topix for CY2021, we note that the sector has once again started to underperform Topix over the past week. Reverting to the mean is an uninspiring development when it comes to Japanese bank stock performance, as the graph at the end of this Insight clearly shows.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Renesas Electronics / Equity Capital Markets

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:<ul>
<li dir="ltr" aria-level="1">US$2.8bn bn in 2017 <a href="https://www.smartkarma.com/insights/renesas-electronics-placement-additional-thoughts-on-valuation-flotation-and-ownership" target="_blank" rel="noopener">Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership</a></li>
<li dir="ltr" aria-level="1">US$2.4bn in 2018 <a href="https://www.smartkarma.com/insights/renesas-placement-tighter-effective-discount-and-placement-overhangs-but-statistic-supports-a-bid" target="_blank" rel="noopener">Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid</a></li>
</ul>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:
US$2.8bn bn in 2017 Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership
US$2.4bn in 2018 Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Private Capital Markets

GoTo Gojek Tokopedia Tbk PT / Private Capital Markets

<a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a> have finally announced that they will merge to form GoTo Group, in what will be Indonesia's largest-ever business deal to date. The new GoTo Group will also seek a dual listing both in Jakarta and the US but it is yet unclear what shape the listing will take at this stage. 
This will create an Indonesia-focused digital powerhouse with exposure to Ride-Hailing, Food Delivery, Digital Payments, Digital Finance, and e-commerce, making it a formidable player in Indonesia's booming digital economy.
The merged entity will present a challenge, not just to <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and its Shopee platform but more pertinently for <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab,</a> which is in the process of seeking a listing in the US through the largest SPAC listing to date.
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One key area of overlap between <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a> is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 36.1% stake in OVO, it is unclear what comes next although it is likely Tokopedia will look to migrate its customers to GoPay and sell its stake in OVO.
<a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek </a>has already stepped up its move into the digital banking space through the recent increase in its stake in <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> to 22% but it also has strong backers for GoPay in the shape of <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US).</a>
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The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. 
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There will be significant synergies between the two companies in areas such as deliveries, payments, and financial services, with an ever-increasing use-case for GoPay.
<a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener"></a>The combined size of the two companies would be around US$18bn under the latest valuations but it is suggested that it could command a valuation of US$40bn with a US listing, although it is not yet sure what shape or form that listing will take although its looks likely it will be a dual listing by the end of this year.
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A straight IPO rather than a SPAC listing would be the most straightforward and the preferred option, even if it takes a bit longer to execute. The merged entity will be a more formidable adversary for other digital players and especially <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> but also for Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US))</a>,  <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a>, and Bukalapak.
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Gojek and Tokopedia have finally announced that they will merge to form GoTo Group, in what will be Indonesia's largest-ever business deal to date. The new GoTo Group will also seek a dual listing both in Jakarta and the US but it is yet unclear what shape the listing will take at this stage. 
This will create an Indonesia-focused digital powerhouse with exposure to Ride-Hailing, Food Delivery, Digital Payments, Digital Finance, and e-commerce, making it a formidable player in Indonesia's booming digital economy.
The merged entity will present a challenge, not just to Sea Ltd (SE US) and its Shopee platform but more pertinently for Grab, which is in the process of seeking a listing in the US through the largest SPAC listing to date.

One key area of overlap between Gojek and Tokopedia is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 36.1% stake in OVO, it is unclear what comes next although it is likely Tokopedia will look to migrate its customers to GoPay and sell its stake in OVO.
Gojek has already stepped up its move into the digital banking space through the recent increase in its stake in Bank Jago (ARTO IJ) to 22% but it also has strong backers for GoPay in the shape of Facebook Inc A (FB US) and Paypal Holdings (PYPL US).


The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. 


There will be significant synergies between the two companies in areas such as deliveries, payments, and financial services, with an ever-increasing use-case for GoPay.
The combined size of the two companies would be around US$18bn under the latest valuations but it is suggested that it could command a valuation of US$40bn with a US listing, although it is not yet sure what shape or form that listing will take although its looks likely it will be a dual listing by the end of this year.


A straight IPO rather than a SPAC listing would be the most straightforward and the preferred option, even if it takes a bit longer to execute. The merged entity will be a more formidable adversary for other digital players and especially Grab (0967655D SP) but also for Shopee (Sea Ltd (SE US)),  Lazada Group (LAZADA SP), and Bukalapak.


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.

Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan growth has never been lower in our time series. The relative impact to profit favours Japan's banks.

Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan growth has never been lower in our time series. The relative impact to profit favours Japan's banks. 

Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021, according to the Japanese Bankers Association (JBA), rising +2.0% MoM and a remarkable +9.7% YoY.  According to the Bank of Japan (BoJ), average deposit balances in March 2021 were ¥1,067.259 trillion (US$9.79 trillion); this was also an all-time high level.For Japanese bankers, however, such impressive statistics are anything but good news.  Already awash in surplus cash, adding another ¥6.0 trillion (US$55.15 billion) to the banks’ collective coffers in a single month is of almost no value to them whatsoever. The metaphorical equivalent of such an event would be something like turning a fire hose onto an already-flooded river.  It just makes an already bad situation far worse.  Major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 49%, underlining the fact that customer funds continue to flow into Japanese banks far faster than they are able to process that inflow and reinvest the proceeds as loans to help support an economic recovery. Banks simply do not need those mountains of money that pile higher and higher as each month passes.January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/203/578/original/image_7378929621619743178079.png?1619743180" class="editor-image img-responsive" data-smartkarma-image-id="203578"></figure>

Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021, according to the Japanese Bankers Association (JBA), rising +2.0% MoM and a remarkable +9.7% YoY.  According to the Bank of Japan (BoJ), average deposit balances in March 2021 were ¥1,067.259 trillion (US$9.79 trillion); this was also an all-time high level.For Japanese bankers, however, such impressive statistics are anything but good news.  Already awash in surplus cash, adding another ¥6.0 trillion (US$55.15 billion) to the banks’ collective coffers in a single month is of almost no value to them whatsoever. The metaphorical equivalent of such an event would be something like turning a fire hose onto an already-flooded river.  It just makes an already bad situation far worse.  Major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 49%, underlining the fact that customer funds continue to flow into Japanese banks far faster than they are able to process that inflow and reinvest the proceeds as loans to help support an economic recovery. Banks simply do not need those mountains of money that pile higher and higher as each month passes.January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.“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 Deposits:  Mountain High, Value Low

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)

Japanese Bank Lending: Mean Reversion

The lending ‘boom’, triggered by companies rushing to secure bank funding in anticipation of extended nationwide ‘lock-downs’ to counteract the...

J. Brian Waterhouse

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. The current deal would be of somewhat...

Sumeet Singh

GoTo - Enter the Green Dragon

The confirmation of the merger between Gojek and Tokopedia creates an Indonesian digital powerhouse under GoTo Group, which will seek a dual...

Angus Mackintosh

Japan – Loan Growth Exceeds Indonesia

Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan...

Daniel Tabbush

Japanese Bank Deposits: Mountain High, Value Low

Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021. For Japanese bankers, however, such impressive...

J. Brian Waterhouse

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