Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> is probably too cheap. There is a fair bit of "easy" value there even assuming all the equity affiliate stakes are worth, well, nothing.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-resources-power-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5385:1" rel="noopener">China Resources Power (836 HK)</a> (CRP)'s 81.81%-held <a href="https://www.smartkarma.com/entities/china-resources-new-energy-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:50306:1" rel="noopener">China Resources New Energy (001248 CH)</a> xlosed up ~137% on debut, and worth ~350% of CRP's market cap. That's not sustainable.</li>
<li>
<a href="https://www.smartkarma.com/entities/atlas-arteria-ltd" target="_blank" data-smartkarma-citation="entities:14430:1" rel="noopener">Atlas Arteria (ALX AU)</a> sticks to its guns, urging shareholders to hold their stock, signalling IFM can pay more. But realistically, IFM has declared terms best &amp; final.</li>
</ul>



Digital Garage (4819 JP) is probably too cheap. There is a fair bit of "easy" value there even assuming all the equity affiliate stakes are worth, well, nothing.

China Resources Power (836 HK) (CRP)'s 81.81%-held China Resources New Energy (001248 CH) xlosed up ~137% on debut, and worth ~350% of CRP's market cap. That's not sustainable.

Atlas Arteria (ALX AU) sticks to its guns, urging shareholders to hold their stock, signalling IFM can pay more. But realistically, IFM has declared terms best &amp; final.


Last Week In Event SPACE: Digital Garage/Kakaku, Chine Resources Power, Atlas Arteria

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

The Japanese financial markets are now so liquid, thanks to the efforts of the BoJ as well as the commercial banks to minimize the impact of the coronavirus pandemic, that bankruptcies in January 2021 fell to their lowest level in 31 years.  Meanwhile, overall lending continues to edge down in terms of loans outstanding, even though YoY growth rates remain relatively high.While the Japanese bank sector has enjoyed a rally since the beginning of the year as the Nikkei-225 Index rises to its highest level in 31 years on high hopes for the successful roll-out of an effective COVID-19 vaccine, the fundamental outlook for the banks is clouded.   “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

The Japanese financial markets are now so liquid, thanks to the efforts of the BoJ as well as the commercial banks to minimize the impact of the coronavirus pandemic, that bankruptcies in January 2021 fell to their lowest level in 31 years.  Meanwhile, overall lending continues to edge down in terms of loans outstanding, even though YoY growth rates remain relatively high.While the Japanese bank sector has enjoyed a rally since the beginning of the year as the Nikkei-225 Index rises to its highest level in 31 years on high hopes for the successful roll-out of an effective COVID-19 vaccine, the fundamental outlook for the banks is clouded.   “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Bank Lending:  The Good, The Bad & The Terminally Indebted

Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) came to +9.7% YoY in December 2020: the highest YoY growth level ever recorded, surpassing the previous record of +9.5% YoY growth rate set back in August and far exceeding the banks’ aggregate loan growth which declined in December 2020 to just +5.3% YoY.  This represented the 171st consecutive month of YoY deposit growth for all JBA member banks.  Banks have more money than they know what to do with, and not nearly enough borrowers to lend to.Taking a closer look at the data, major bank deposit balances have actually fallen in five of the last six months (November being the exception). In contrast to the major banks, deposit balances at both the regional and secondary regional banks continue to grow markedly, +8.9% YoY (a new all-time record) and +8.6% YoY (2nd-highest YoY growth rate ever), respectively.  Unsurprisingly, their loan-to-deposit ratios (LDRs) continue to deteriorate rapidly, although nowhere near the average LDR of the major banks which is now down to 51.4%.‘Profitless prosperity’ remains an ongoing reality for Japan’s banks: awash in cash, margins under relentless pressure and struggling to avoid yet another year of shareholder disappointment through further profits decline.  Some small local banks are already forecasting consolidated net losses for FY3/2021 that have little to do with the adverse economic impact of COVID-19 per se but reflect the difficult operating conditions for all Japanese banks in an ongoing near-zero interest rate environment.“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/185/011/original/8300-WR-JBanks-2021-0126-EbbTide+TPNBNKvsTPX+in+2020.jpg?1611797731" class="editor-image img-responsive" data-smartkarma-image-id="185011"></figure></section>

Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) came to +9.7% YoY in December 2020: the highest YoY growth level ever recorded, surpassing the previous record of +9.5% YoY growth rate set back in August and far exceeding the banks’ aggregate loan growth which declined in December 2020 to just +5.3% YoY.  This represented the 171st consecutive month of YoY deposit growth for all JBA member banks.  Banks have more money than they know what to do with, and not nearly enough borrowers to lend to.Taking a closer look at the data, major bank deposit balances have actually fallen in five of the last six months (November being the exception). In contrast to the major banks, deposit balances at both the regional and secondary regional banks continue to grow markedly, +8.9% YoY (a new all-time record) and +8.6% YoY (2nd-highest YoY growth rate ever), respectively.  Unsurprisingly, their loan-to-deposit ratios (LDRs) continue to deteriorate rapidly, although nowhere near the average LDR of the major banks which is now down to 51.4%.‘Profitless prosperity’ remains an ongoing reality for Japan’s banks: awash in cash, margins under relentless pressure and struggling to avoid yet another year of shareholder disappointment through further profits decline.  Some small local banks are already forecasting consolidated net losses for FY3/2021 that have little to do with the adverse economic impact of COVID-19 per se but reflect the difficult operating conditions for all Japanese banks in an ongoing near-zero interest rate environment.“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Banks:  Buddy, Can We Spare You a Dime !

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) confirm the trend that we noted in earlier Smartkarma Insights on Japanese bank lending, namely that lending by the major banks continues to decline in terms of the outstanding loan balance since reaching a peak in June, even though YoY growth rates remain high compared to previous years.Total loan outstandings have fallen in five of the last six months (November being the exception), primarily because of declining loan balances at the major banks.  The declaration of a State of Emergency in several prefectures, as Japan continues to battle a surge in coronavirus infections, is unlikely to change this trend significantly.  However, as noted in other recent Smartkarma Insights on the outlook for the Japanese banking sector in 2021, these are loans, not grants, and will need either to be repaid in full or, if that becomes impossible, be declared as ‘value impaired’ by the lending banks and properly reserved against.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) confirm the trend that we noted in earlier Smartkarma Insights on Japanese bank lending, namely that lending by the major banks continues to decline in terms of the outstanding loan balance since reaching a peak in June, even though YoY growth rates remain high compared to previous years.Total loan outstandings have fallen in five of the last six months (November being the exception), primarily because of declining loan balances at the major banks.  The declaration of a State of Emergency in several prefectures, as Japan continues to battle a surge in coronavirus infections, is unlikely to change this trend significantly.  However, as noted in other recent Smartkarma Insights on the outlook for the Japanese banking sector in 2021, these are loans, not grants, and will need either to be repaid in full or, if that becomes impossible, be declared as ‘value impaired’ by the lending banks and properly reserved against.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Bank Lending: An Ebb Tide in 2021?

Japanese people are renowned for their thrift.  Even when deposit interest rates are zero they continue to save.  Cash continues to pour into the banks at near-record levels, both from corporates and from individuals.  But that is not good news: there is little the banks can do with all those savings when loan rates are also zero (and less than zero in some circumstances!).  Unsurprisingly, Japanese banks are not looking forward to a particularly Merry Christmas this year.Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) touched +9.4% YoY in November 2020: the 2nd-highest YoY growth level ever recorded and just short of the record +9.5% YoY growth rate set back in August.  Most of the additional ¥8.251 trillion (US$79.34 billion) in funds deposited with the banks in November ended up with the major banks, pushing their loan-to-deposit ratios (LDRs) down to record lows of inefficiency as deposit inflows were over four times greater than new loan outflows.  Only the secondary regional banks registered a small decline in deposit balances: a curious development, as their loan balances grew by a record +7.0% YoY.As the world gets ready to celebrate the end of what has been a terrible year globally and to welcome in the start of 2021 in the fervent hope that it will prove to be better than 2020, there is seemingly no end to the financial pain for Japan’s embattled banks… or for their long-suffering shareholders.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/179/761/original/TPNBNK+vs+TPX+in+CY2020.jpg?1608608493" class="editor-image img-responsive" data-smartkarma-image-id="179761"></figure></section>

Japanese people are renowned for their thrift.  Even when deposit interest rates are zero they continue to save.  Cash continues to pour into the banks at near-record levels, both from corporates and from individuals.  But that is not good news: there is little the banks can do with all those savings when loan rates are also zero (and less than zero in some circumstances!).  Unsurprisingly, Japanese banks are not looking forward to a particularly Merry Christmas this year.Deposit growth at the 112 banks that are members of the Japanese Bankers Association (JBA) touched +9.4% YoY in November 2020: the 2nd-highest YoY growth level ever recorded and just short of the record +9.5% YoY growth rate set back in August.  Most of the additional ¥8.251 trillion (US$79.34 billion) in funds deposited with the banks in November ended up with the major banks, pushing their loan-to-deposit ratios (LDRs) down to record lows of inefficiency as deposit inflows were over four times greater than new loan outflows.  Only the secondary regional banks registered a small decline in deposit balances: a curious development, as their loan balances grew by a record +7.0% YoY.As the world gets ready to celebrate the end of what has been a terrible year globally and to welcome in the start of 2021 in the fervent hope that it will prove to be better than 2020, there is seemingly no end to the financial pain for Japan’s embattled banks… or for their long-suffering shareholders.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Japanese Banks:  Remember, Remember, the Thrift of November

Japan

Resona Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides financial services, including banking, trust operations, and credit card services. Resona Holdings also offers consulting services related to personal loans, asset management, and asset succession.

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Resona Holdings (8308 JP)

Last Week In Event SPACE: Digital Garage/Kakaku, Chine Resources Power, Atlas Arteria

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Japanese Bank Lending: The Good, The Bad & The Terminally Indebted

Japanese financial markets are now so liquid, thanks to the efforts of the BoJ and the commercial banks, that bankruptcies in January 2021 fell to...

J. Brian Waterhouse

Japanese Banks: Buddy, Can We Spare You a Dime !

Cash continues to flow into bank deposits in Japan faster than the banks appear able to channel those funds into loans or investments that might...

J. Brian Waterhouse

Japanese Bank Lending: An Ebb Tide in 2021?

The ‘dash for cash’ by large corporates appears to be over, at least in terms of lending by the major banks. Only the small secondary regionals...

J. Brian Waterhouse

Japanese Banks: Remember, Remember, the Thrift of November

Japanese people are renowned for their thrift. Even when deposit interest rates are zero they continue to save. But there is little the banks can...

J. Brian Waterhouse

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