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

Equity Bottom-Up

*We Anxiously Await HSBC’s US Departure: According the Financial Times on November 28, 2020, HSBC is considering offloading its entire US retail network - although a full exit from other businesses in the US is unlikely. The recommendation of a US exit is expected to be presented to the board as early as this week, although the Group is scheduled to provide an update on its plans for its French and US businesses in February 2021; *HSBCNA Should Be Sold: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. Knowing HSBC management as we do, they will continue making the same mistakes over and over again; and    *Hong Kong Tax Rate Continues To Mask Management’s Global Mistakes: When your core subsidiary in Hong Kong has a statutory corporate tax rate of 16.5% and the organization is not subject to global taxation, low taxes can mask the many mistakes that HSBC makes.

*We Anxiously Await HSBC’s US Departure: According the Financial Times on November 28, 2020, HSBC is considering offloading its entire US retail network - although a full exit from other businesses in the US is unlikely. The recommendation of a US exit is expected to be presented to the board as early as this week, although the Group is scheduled to provide an update on its plans for its French and US businesses in February 2021; *HSBCNA Should Be Sold: HSBCNA is a chronic mess, and there is absolutely no need for HSBC to maintain a full commercial/retail banking presence in the US. It cannot earn a positive return under its current structure; credit is again about to fall off a cliff; does not earning; NIMs are among the lowest in the USA; and capital is shortly about to fall below regulatory guidance. Further, the bad acquisitions and regulatory headaches should spur management to cut and run in the US. Knowing HSBC management as we do, they will continue making the same mistakes over and over again; and    *Hong Kong Tax Rate Continues To Mask Management’s Global Mistakes: When your core subsidiary in Hong Kong has a statutory corporate tax rate of 16.5% and the organization is not subject to global taxation, low taxes can mask the many mistakes that HSBC makes. 

HSBC Holdings Plc – Act Now, You’ll Never See These Prices Again

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

While the S&amp;P 500 has hit marginal new highs, price action of the S&amp;P 500 and the price and RS of several Sectors/subsectors is similar to the periods leading up to the October 2018 and May 2019 breakdowns. We draw several similarities in today’s report, and we continue to believe upside is likely to be muted from here barring additional positive developments.

While the S&amp;P 500 has hit marginal new highs, price action of the S&amp;P 500 and the price and RS of several Sectors/subsectors is similar to the periods leading up to the October 2018 and May 2019 breakdowns. We draw several similarities in today’s report, and we continue to believe upside is likely to be muted from here barring additional positive developments.

U.S. Equities: Mixed Signals Punctuate Muted Outlook

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)

There are plenty of concerns with the outlook for lenders in Canada. Real GDP is weakening for the past few quarters, and where domestic credit growth is decelerating fast. Some economists believe the former causes the latter, although we believe credit growth is a key driver of economic growth. In either case, the outlook is not wholly positive for Canada. If though credit growth is a lead indicator of what to expect with economic growth, we can expect further deceleration.  This can then weigh on bad loan formation and worsening net interest income growth.

There are plenty of concerns with the outlook for lenders in Canada. Real GDP is weakening for the past few quarters, and where domestic credit growth is decelerating fast. Some economists believe the former causes the latter, although we believe credit growth is a key driver of economic growth. In either case, the outlook is not wholly positive for Canada. If though credit growth is a lead indicator of what to expect with economic growth, we can expect further deceleration.  This can then weigh on bad loan formation and worsening net interest income growth. 

Canada Banks - Weakening Indicators Suggest Downturn in Credit Metrics

* Despite bottom-line improvement on a go-forward basis, deferred tax asset (DTA) write-downs are likely at major global financial companies  - beckoning for major 2018 EPS revisions.* Domestic institutions such as, Bank of America (BAC.US), Goldman Sachs (GS.US), and Morgan Stanley (MS.US) stand out with large DTAs in the US.  * Of the international companies with US subsidiaries, the Swiss financials would post shocking results, while HSBC Holdings could have a 25% EPS adjustment, by our…

* Despite bottom-line improvement on a go-forward basis, deferred tax asset (DTA) write-downs are likely at major global financial companies  - beckoning for major 2018 EPS revisions.* Domestic institutions such as, Bank of America (BAC.US), Goldman Sachs (GS.US), and Morgan Stanley (MS.US) stand out with large DTAs in the US.  * Of the international companies with US subsidiaries, the Swiss financials would post shocking results, while HSBC Holdings could have a 25% EPS adjustment, by our…

HSBC Holdings Plc – Likely Getting a Big Hickey From President Trump

* Turning HSBC Into Tucker’s Town: In just two months, new Chairman Mark Tucker is already grabbing headlines. However, more than just headlines are required to turn the HSBC North America (5.HK, HSBA.LN) [HSBC NA] dumpster fire into Tucker’s Town – the beautiful island oasis in the middle of the Atlantic. We do have faith.    * Synchrony Deal Could Significantly Repair US Balance Sheet: Notwithstanding the risk of failing to gain regulatory support, an HSBC North America (HSBC NA) acquisition of Synchrony Financial (SYF.US) could go a long way in turning the American franchise around on many levels – with the most dramatic improvement being 67% accretive to HSBC NA's bottom-line despite valuations being a bit long in the tooth at the moment.   * Deal Could Be Capital and EPS Accretive to HSBC: Synchrony would be a smart deal for HSBC Holdings plc (HSBC) to embark upon – provided that it has the cash to do so. By our calculation, Synchrony would be additive to Group bottom-line in the neighborhood of USD 1.1 bn (2.1%) in 2018. Post-Trump potential tax reform measures, earnings accretion would amount to USD 1.6 bn or 2.6%. That said, a deal value of USD 35 bn converted into a share buyback would reduce managerial stress and likely be more accretive to EPS.

* Turning HSBC Into Tucker’s Town: In just two months, new Chairman Mark Tucker is already grabbing headlines. However, more than just headlines are required to turn the HSBC North America (5.HK, HSBA.LN) [HSBC NA] dumpster fire into Tucker’s Town – the beautiful island oasis in the middle of the Atlantic. We do have faith.    * Synchrony Deal Could Significantly Repair US Balance Sheet: Notwithstanding the risk of failing to gain regulatory support, an HSBC North America (HSBC NA) acquisition of Synchrony Financial (SYF.US) could go a long way in turning the American franchise around on many levels – with the most dramatic improvement being 67% accretive to HSBC NA's bottom-line despite valuations being a bit long in the tooth at the moment.   * Deal Could Be Capital and EPS Accretive to HSBC: Synchrony would be a smart deal for HSBC Holdings plc (HSBC) to embark upon – provided that it has the cash to do so. By our calculation, Synchrony would be additive to Group bottom-line in the neighborhood of USD 1.1 bn (2.1%) in 2018. Post-Trump potential tax reform measures, earnings accretion would amount to USD 1.6 bn or 2.6%. That said, a deal value of USD 35 bn converted into a share buyback would reduce managerial stress and likely be more accretive to EPS.

HSBC Holdings Plc – Just Crazy Enough To Work

Canada

The Toronto-Dominion Bank conducts a general banking business through banking branches and offices located throughout Canada and overseas. The Bank and other subsidiaries offer a broad range of banking, advisory services, and discount brokerage to individuals, businesses, financial institutions, governments, and multinational corporations.

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Toronto Dominion Bank (TD CN)

HSBC Holdings Plc – Act Now, You’ll Never See These Prices Again

HSBC HOLDINGS PLC: Financial Times Suggesting Board Will Be Presented With Options On US Franchise This Week. This Was A Long Time In Coming.

Thomas J. Monaco

U.S. Equities: Mixed Signals Punctuate Muted Outlook

While the S&P 500 has hit marginal new highs, price action of the S&P 500 and the price and RS of several Sectors/subsectors is similar to...

Vermilion Research

Canada Banks - Weakening Indicators Suggest Downturn in Credit Metrics

There are plenty of concerns with the outlook for lenders in Canada. Real GDP is weakening for the past few quarters, and where domestic credit...

Daniel Tabbush

HSBC Holdings Plc – Likely Getting a Big Hickey From President Trump

* Despite bottom-line improvement on a go-forward basis, deferred tax asset (DTA) write-downs are likely at major global financial companies -...

Thomas J. Monaco

HSBC Holdings Plc – Just Crazy Enough To Work

* Turning HSBC Into Tucker’s Town: In just two months, new Chairman Mark Tucker is already grabbing headlines. However, more than just headlines...

Thomas J. Monaco

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