Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

<ul>
<li>We welcome the regulators' formalization of financial asset classifications. This will gradually remove regulatory arbitrage and pave the way for further bank reintermediation.</li>
<li>The new rules will likely have limited impacts on bond holdings that have active secondary markets, but illiquid debt investment plans will come under more intense regulatory and auditor scrutiny.</li>
<li>We see an impact of 10-15bp on the listed banks' reported NPL ratios. That said, a handful of banks may be at risk of capital shortages if the environment worsens. </li>
</ul>


We welcome the regulators' formalization of financial asset classifications. This will gradually remove regulatory arbitrage and pave the way for further bank reintermediation.
The new rules will likely have limited impacts on bond holdings that have active secondary markets, but illiquid debt investment plans will come under more intense regulatory and auditor scrutiny.
We see an impact of 10-15bp on the listed banks' reported NPL ratios. That said, a handful of banks may be at risk of capital shortages if the environment worsens. 


Chinese Banks: New Asset Classification Rules | You Can Run but You Can't Hide

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>In 2Q22, banks continued to face NIM contractions, but the asset quality remained stable in spite of the headwinds from COVID restrictions.</li><li>Earnings growth slightly slowed in 2Q22, dragged by NIM contractions and slower loan growth.</li><li>The 15bps cut of 5-yr LPR and 5bps cut of 1-yr LPR on 22 Aug are in line with market expectations. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

In 2Q22, banks continued to face NIM contractions, but the asset quality remained stable in spite of the headwinds from COVID restrictions.Earnings growth slightly slowed in 2Q22, dragged by NIM contractions and slower loan growth.The 15bps cut of 5-yr LPR and 5bps cut of 1-yr LPR on 22 Aug are in line with market expectations. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Banking Sector – Banks’ Asset Quality Remained Stable in 2Q22

Macroeconomics

Monthly Newsletter | May 2021
Monetary data in May suggest that the environment has turned a notch tighter in China. Loan and deposit growth surprised on the downside and signals the beginning of yet another challenging period for the Chinese banks in the months ahead.
Both the asset and liability sides of the banks' balance sheets hit a wall in April. Loan growth missed consensus by a notable margin, driven by a softer mortgage market and slower corporate credit expansion. The net decline in new deposits was more worrying and the risk of disintermediation is on the rise, particularly for the smaller banks.
Deleveraging real estate exposures remains a top priority for the regulators. New mortgage rates have edged up, continuing a trend since 1Q21. Margins have widened slightly for new corporate loans as well. This supports our view that net interest margins have bottomed out and is mildly positive for the H-share G-SIBs.  
We expect the central bank to maintain a neutral policy for the remainder of 2021. The policy rates and loan prime rate will likely hold steady. That said, smaller banks that rely extensively on the interbank market may find it increasingly difficult to source cheap funding. Interbank bank defaults among the unlisted banks are not a remote possibility.
We will remain underweight the H-share banks against MSCI China <a href="https://www.smartkarma.com/entities/msci-china-index" target="_blank" data-smartkarma-citation="entities:22895:1" rel="noopener">(MXCN INDEX)</a> until 2Q21 earnings. Meanwhile, we will watch closely whether a sales rebound story will materialize for the life insurers, as bank deposit outflows may find their way into savings polices in the coming quarters.

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Monthly Newsletter | May 2021
Monetary data in May suggest that the environment has turned a notch tighter in China. Loan and deposit growth surprised on the downside and signals the beginning of yet another challenging period for the Chinese banks in the months ahead.
Both the asset and liability sides of the banks' balance sheets hit a wall in April. Loan growth missed consensus by a notable margin, driven by a softer mortgage market and slower corporate credit expansion. The net decline in new deposits was more worrying and the risk of disintermediation is on the rise, particularly for the smaller banks.
Deleveraging real estate exposures remains a top priority for the regulators. New mortgage rates have edged up, continuing a trend since 1Q21. Margins have widened slightly for new corporate loans as well. This supports our view that net interest margins have bottomed out and is mildly positive for the H-share G-SIBs.  
We expect the central bank to maintain a neutral policy for the remainder of 2021. The policy rates and loan prime rate will likely hold steady. That said, smaller banks that rely extensively on the interbank market may find it increasingly difficult to source cheap funding. Interbank bank defaults among the unlisted banks are not a remote possibility.
We will remain underweight the H-share banks against MSCI China (MXCN INDEX) until 2Q21 earnings. Meanwhile, we will watch closely whether a sales rebound story will materialize for the life insurers, as bank deposit outflows may find their way into savings polices in the coming quarters.


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Glut and Famine: China's Monetary Conditions a Notch Tighter in May

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

* Circular 46 enabling the CBRC to properly do its job, as Shanghai Pudong Development Bank  - the first of many high profile names - gets exposed for aggressive accounting.  * HNA, China Wanda, and Anbang Insurance monkey business also expose numerous shenanigans in the corporate sector as well.<h2>Summary</h2>The appointment of Guo Shuqing to head the China Bank Regulatory Commission (CBRC) was a clear sign that the mainland Chinese authorities are intent on cleaning up some of the excesses within the…

* Circular 46 enabling the CBRC to properly do its job, as Shanghai Pudong Development Bank  - the first of many high profile names - gets exposed for aggressive accounting.  * HNA, China Wanda, and Anbang Insurance monkey business also expose numerous shenanigans in the corporate sector as well.SummaryThe appointment of Guo Shuqing to head the China Bank Regulatory Commission (CBRC) was a clear sign that the mainland Chinese authorities are intent on cleaning up some of the excesses within the…

China Banks – Questionable Accounting Practices Exposed

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.

The China bank numbers show us once again that quarterly figures during the year are hardly reliable. This is because it is in the final quarter when banks top up their impairment costs, showing that previous periods are highly inflated.  At the same time, where stated NPL figures are increasingly held in question, for some banks, special mention loans are soaring. This is yet another way to limit impairment costs and inflate profit.Profit growth of selected China banks (% ch QoQ)<table class="table table-striped"><tbody>
<tr>
<td> </td>
<td style="text-align: right;">2Q16</td>
<td style="text-align: right;">3Q16</td>
<td style="text-align: right;">4Q16</td>
</tr>
<tr>
<td>…</td>
</tr>
</tbody></table>

The China bank numbers show us once again that quarterly figures during the year are hardly reliable. This is because it is in the final quarter when banks top up their impairment costs, showing that previous periods are highly inflated.  At the same time, where stated NPL figures are increasingly held in question, for some banks, special mention loans are soaring. This is yet another way to limit impairment costs and inflate profit.Profit growth of selected China banks (% ch QoQ)

 
2Q16
3Q16
4Q16


…



Sequential Profit Is Telling for China Banks

China

Shanghai Pudong Development Bank Co., Ltd. provides banking services. The Company provides loans, deposits, accounts settlement, foreign exchange, and other services. Shanghai Pudong Development Bank provides its services to individuals, companies, and other groups.

Shanghai Pudong Development Bank Co. (600000 CH)

Price Gauge
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Shanghai Pudong Development Bank Co. (600000 CH)

Chinese Banks: New Asset Classification Rules | You Can Run but You Can't Hide

New asset classification rules have officially been announced. We see this as a long-term positive for the sector as regulators continue to bring...

Stanley Tsai, CFA

China Banking Sector – Banks’ Asset Quality Remained Stable in 2Q22

In 2Q22, banks continued to face NIM contractions, but the asset quality remained stable in spite of the headwinds from COVID restrictions.

CMB International

Glut and Famine: China's Monetary Conditions a Notch Tighter in May

Monetary data in May point to a tighter environment for both lending and funding. Mortgage rates have edged up, but the deposit drain is worrying....

Stanley Tsai, CFA

China Banks – Questionable Accounting Practices Exposed

* Circular 46 enabling the CBRC to properly do its job, as Shanghai Pudong Development Bank - the first of many high profile names - gets exposed...

Thomas J. Monaco

Sequential Profit Is Telling for China Banks

The China bank numbers show us once again that quarterly figures during the year are hardly reliable. This is because it is in the final quarter...

Daniel Tabbush

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