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)

<ul>
<li>The data coming out of US bank results should not surprise and it is also not something that should suddenly improve</li>
<li>BAC reported net charge offs at USD1,498m in 1Q24 up from USD807m in 1Q23, a substantial YoY delta. The QoQ delta is accelerating too, up USD306m in the 90 days</li>
<li>Net interest income is now in decline at BAC at -3% YoY in 1Q24, given the disproportionate rise in funding costs vs interest income</li>
</ul>


The data coming out of US bank results should not surprise and it is also not something that should suddenly improve
BAC reported net charge offs at USD1,498m in 1Q24 up from USD807m in 1Q23, a substantial YoY delta. The QoQ delta is accelerating too, up USD306m in the 90 days
Net interest income is now in decline at BAC at -3% YoY in 1Q24, given the disproportionate rise in funding costs vs interest income


BAC - Net Charge Offs Up 86% YoY And -3% YoY Net Interest Income Growth

<ul>
<li>Wells Fargo has seen its net interest income growth move to -8.3% YoY in 1Q24 from +8.3% YoY in 1Q23</li>
<li>The rate of net interest income growth at JPMorgan has nearly halved in the most recent quarter, to +11.4% YoY</li>
<li>Banks' high-frequency data on balance sheets suggest that there will remain worsening growth rates of net interest income for US banks</li>
</ul>


Wells Fargo has seen its net interest income growth move to -8.3% YoY in 1Q24 from +8.3% YoY in 1Q23
The rate of net interest income growth at JPMorgan has nearly halved in the most recent quarter, to +11.4% YoY
Banks' high-frequency data on balance sheets suggest that there will remain worsening growth rates of net interest income for US banks


US Banks - Faltering Net Interest Income Growth Is Well in Place, But This Should Worsen

Product Marketing Manager, Criat

Raghav Chandra Mathur

Product Marketing Manager

Next-Generation Credit Analytics Provider

Criat

Criat specializes in new-generation data-driven credit analytics. Leveraging our industry-leading DeepCredit analytical technologies, we produce daily-updated forward-looking credit assessment and valuation to help financial institutions stay ahead of risks. Coupled with use-case-driven applications, we extract insights, answer questions and enable smarter credit decisions.

<ul>
<li>Since the start of 2023, the credit risk profiles of the US Banking sector have deteriorated substantially. The US Banking Criat Credit Cycle Index (CCCI) has risen from 2.9bps on January 1, 2023, to 6.7bps on December 1, 2023.</li>
<li>The peak distress felt by the sector this year was in the aftermath of the regional banking crisis in March and the US government debt crisis in May, which saw the sector’s credit risk worsen above its peak of 10bps this year.</li>
<li>Since then, the sector’s CCCI has remained relatively stable, albeit elevated. </li>
</ul>


Since the start of 2023, the credit risk profiles of the US Banking sector have deteriorated substantially. The US Banking Criat Credit Cycle Index (CCCI) has risen from 2.9bps on January 1, 2023, to 6.7bps on December 1, 2023.
The peak distress felt by the sector this year was in the aftermath of the regional banking crisis in March and the US government debt crisis in May, which saw the sector’s credit risk worsen above its peak of 10bps this year.
Since then, the sector’s CCCI has remained relatively stable, albeit elevated. 


Elevated US Banking Risk as Rate Hikes Bite Performance

<ul>
<li>New weekly balance sheets for US large banks shows C&amp;I loan growth turning negative. De-risking continues with cash balances up 15.1% YoY, the fourth week of double digit growth. </li>
<li>Total loan growth is nearly negative with the most recent week's release showing further slowing to 1.11% YoY in week to18 October. </li>
<li>With all of this, US large banks are accelerating their more expensive jumbo time deposits, with growth now at 115% YoY and adding USD26bn in the week. </li>
</ul>


New weekly balance sheets for US large banks shows C&amp;I loan growth turning negative. De-risking continues with cash balances up 15.1% YoY, the fourth week of double digit growth. 
Total loan growth is nearly negative with the most recent week's release showing further slowing to 1.11% YoY in week to18 October. 
With all of this, US large banks are accelerating their more expensive jumbo time deposits, with growth now at 115% YoY and adding USD26bn in the week. 


US Banks - New Weekly Balance Sheets: C&I Loan Growth Turns Negative | Cash +15% | All Loans +1%

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

<ul>
<li>US Banks’ office credit exposures represent a big part of the sector’s credit quality concerns, given the decline in office space occupancy and rising interest rates</li>
<li>Industry data shows that bank funding costs are rising fast, and 3Q23 bank spread trends are mixed; banks with greater mortgage exposure are potentially at greater risk of narrowing spreads</li>
<li>We stick with Capital One for its high lending spreads, negligible mortgage exposure and limited office credit exposure with high coverage; Capital One also has healthy overall NPL coverage</li>
</ul>


US Banks’ office credit exposures represent a big part of the sector’s credit quality concerns, given the decline in office space occupancy and rising interest rates
Industry data shows that bank funding costs are rising fast, and 3Q23 bank spread trends are mixed; banks with greater mortgage exposure are potentially at greater risk of narrowing spreads
We stick with Capital One for its high lending spreads, negligible mortgage exposure and limited office credit exposure with high coverage; Capital One also has healthy overall NPL coverage


US Banks – Office Exposures, Interest Spread Trends to 3Q23

United States

PacWest Bancorp is a bank holding company. The Company, through its banking subsidiary, offers a wide range of commercial banking services.

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Pacwest Bancorp (PACW US)

BAC - Net Charge Offs Up 86% YoY And -3% YoY Net Interest Income Growth

BAC now shows two consecutive quarters of negative net interest income growth, and in 1Q24 it also shows substantially higher total net charge...

Daniel Tabbush

US Banks - Faltering Net Interest Income Growth Is Well in Place, But This Should Worsen

US bank's are now reporting 1Q24 data with far worse net interest income growth, which should not surprise our readers, and this should only...

Daniel Tabbush

Elevated US Banking Risk as Rate Hikes Bite Performance

Dec 5, 2023 Since the start of 2023, the credit risk profiles of the US Banking sector have deteriorated substantially. The US Banking Criat...

Criat

US Banks - New Weekly Balance Sheets: C&I Loan Growth Turns Negative | Cash +15% | All Loans +1%

New weekly balance sheet data gives near real-time view. C&I loans just turned negative. Cash is growing fast, total loans nearly negative. Large...

Daniel Tabbush

US Banks – Office Exposures, Interest Spread Trends to 3Q23

US banks face office and CRE credit quality risks. Bank funding costs are rising, squeezing the spreads of banks with big mortgage exposures; we...

Victor Galliano

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BAC - Net Charge Offs Up 86% YoY And -3% YoY Net Interest Income Growth

BAC now shows two consecutive quarters of negative net interest income growth, and in 1Q24 it also shows substantially higher total net charge...

Daniel Tabbush

US Banks - Faltering Net Interest Income Growth Is Well in Place, But This Should Worsen

US bank's are now reporting 1Q24 data with far worse net interest income growth, which should not surprise our readers, and this should only...

Daniel Tabbush

Elevated US Banking Risk as Rate Hikes Bite Performance

Dec 5, 2023 Since the start of 2023, the credit risk profiles of the US Banking sector have deteriorated substantially. The US Banking Criat...

Criat

US Banks - New Weekly Balance Sheets: C&I Loan Growth Turns Negative | Cash +15% | All Loans +1%

New weekly balance sheet data gives near real-time view. C&I loans just turned negative. Cash is growing fast, total loans nearly negative. Large...

Daniel Tabbush

US Banks – Office Exposures, Interest Spread Trends to 3Q23

​US banks face office and CRE credit quality risks. Bank funding costs are rising, squeezing the spreads of banks with big mortgage exposures; we...

Victor Galliano

US banks face office and CRE credit quality risks. Bank funding costs are rising, squeezing the spreads of banks with big mortgage exposures; we...