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)

It should be no surprise that US banks’ credit costs have turned to reversals. This is the case for the largest banks reporting, even if not for all the community or regional banks. What may surprise though is that despite this, credit costs for FY20 remain exceptionally high compared with recent years. This suggests that credit costs can remain low during FY21.

It should be no surprise that US banks’ credit costs have turned to reversals. This is the case for the largest banks reporting, even if not for all the community or regional banks. What may surprise though is that despite this, credit costs for FY20 remain exceptionally high compared with recent years. This suggests that credit costs can remain low during FY21. 

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

*Super Results And Will Only Get Better: JP Morgan Chase &amp; Co (JPM.US) [JPM] reported 4Q20 bottom-line results of USD 12.1 bn, increasing USD 2.7 bn (28.5%) linked quarter. On a core operating basis, we note an even stronger QOQ improvement, with numbers coming in at USD 12.1 bn or USD 3.1 bn (34.6%) higher than 3Q20. Results were essentially driven by a reserve reversal of USD 1.9 bn, which no doubt will be a consistent theme in 2021;*Credit Weakness Significantly Decelerates: We find that net new NPLs on a linked quarter amounted to only USD 1 mn or well under 1.0% on an annualized basis. The pace of increase has decelerated from the 7.0% and 26% posted in 3Q20 and 2Q20, respectively; and*Solid Share Buyback In Place: JPM noted that it could repurchase a maximum number of shares of USD 4.5 bn for 1Q21.

*Super Results And Will Only Get Better: JP Morgan Chase &amp; Co (JPM.US) [JPM] reported 4Q20 bottom-line results of USD 12.1 bn, increasing USD 2.7 bn (28.5%) linked quarter. On a core operating basis, we note an even stronger QOQ improvement, with numbers coming in at USD 12.1 bn or USD 3.1 bn (34.6%) higher than 3Q20. Results were essentially driven by a reserve reversal of USD 1.9 bn, which no doubt will be a consistent theme in 2021;*Credit Weakness Significantly Decelerates: We find that net new NPLs on a linked quarter amounted to only USD 1 mn or well under 1.0% on an annualized basis. The pace of increase has decelerated from the 7.0% and 26% posted in 3Q20 and 2Q20, respectively; and*Solid Share Buyback In Place: JPM noted that it could repurchase a maximum number of shares of USD 4.5 bn for 1Q21. 

*Results Supported By Lack Of Provisions: Citigroup (C.US) [Citi] reported 4Q20 bottom-line results of USD 4.6 bn, increasing USD 1.5 bn (47.2%) linked quarter. Citi did not provision in 4Q20 an reversed USD 46 mn – enabling its loss provision to decline USD 2.4 bn (101.9%) linked quarter;*Despite Reserve Release, Credit Materially Worse: Despite the perception of improved credit quality improvement in the US and in contravention to JPM, Citi’s NPLs increased USD 395 mn (7.4%) on a linked quarter basis to USD 5.7 bn. Net new NPLs increased USD 1.8 bn or 136.8% on an annualized basis – accelerating versus the 114.3% posted in 3Q20;*Problematic Cost Basis: Although expenses did exhibit a USD 250 mn (2.3%) linked quarter improvement. Despite the expense improvement, Citi’s C/I ratio continues to worsen – increasing 1.6% to 66.0%. We are hopeful that new CEO Jane Fraser can finally turn this ship around, and enable Citi to achieve its targeted 12% ROTCE over time.

*Results Supported By Lack Of Provisions: Citigroup (C.US) [Citi] reported 4Q20 bottom-line results of USD 4.6 bn, increasing USD 1.5 bn (47.2%) linked quarter. Citi did not provision in 4Q20 an reversed USD 46 mn – enabling its loss provision to decline USD 2.4 bn (101.9%) linked quarter;*Despite Reserve Release, Credit Materially Worse: Despite the perception of improved credit quality improvement in the US and in contravention to JPM, Citi’s NPLs increased USD 395 mn (7.4%) on a linked quarter basis to USD 5.7 bn. Net new NPLs increased USD 1.8 bn or 136.8% on an annualized basis – accelerating versus the 114.3% posted in 3Q20;*Problematic Cost Basis: Although expenses did exhibit a USD 250 mn (2.3%) linked quarter improvement. Despite the expense improvement, Citi’s C/I ratio continues to worsen – increasing 1.6% to 66.0%. We are hopeful that new CEO Jane Fraser can finally turn this ship around, and enable Citi to achieve its targeted 12% ROTCE over time.

The Thai credit card company, <a href="https://www.smartkarma.com/entities/krungthai-card-pcl" target="_blank" data-smartkarma-citation="entities:20097:1" rel="noopener">Krungthai Card (KTC TB)</a> has been a favorite for some time. This was due to margins, returns, cost containment, managing credit risk and stability of recoveries. None of this has really changed, although profit growth is now uncharacteristically negative. What has though changed is the apparent value, where shares are on current PB of 9.5x and 49x current annualized earnings.

The Thai credit card company, Krungthai Card (KTC TB) has been a favorite for some time. This was due to margins, returns, cost containment, managing credit risk and stability of recoveries. None of this has really changed, although profit growth is now uncharacteristically negative. What has though changed is the apparent value, where shares are on current PB of 9.5x and 49x current annualized earnings. 

The theme for global banks is one of lowered credit costs, improved loan demand and better fee income. The comparative to last year should be exceptional for many banks. Where flu season ends in about two months and with vaccinations starting, this further improves the economic outlook, and therefore credit risk of banks.

The theme for global banks is one of lowered credit costs, improved loan demand and better fee income. The comparative to last year should be exceptional for many banks. Where flu season ends in about two months and with vaccinations starting, this further improves the economic outlook, and therefore credit risk of banks. 

United States

Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance.  The Company operates through physical stores, the Internet and other distribution channels across North America and elsewhere internationally.

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Wells Fargo & Co (WFC US)

US Banks – Crumbling Credit Costs

It should be no surprise that credit costs are in reversal for some. What may surprise though is that despite this, credit costs for FY20 remain...

Daniel Tabbush

JP Morgan Chase & Co. – Just Wow

JP MORGAN CHASE: JPM] reported 4Q20 bottom-line results increased 28.5% linked quarter, driven by a reserve reversal. Net new NPLs on a linked...

Thomas J. Monaco

Citigroup – Massive Clean Up Required

CITIGROUP: Citi reported 4Q20 results of USD 4.6 bn, increasing USD 1.5 bn (47.2%) linked quarter due to a 102% provision decline. Net new NPLs...

Thomas J. Monaco

KTC – Too Far Too Fast?

Fundamentals have changed dramatically at KTC, but value has, where shares are on current PB of 9.5x and 49x current annualized earnings.

Daniel Tabbush

Banks - A Turning Point

The theme for global banks is one of lowered credit costs, improved loan demand and better fee income. The comparative to last year should be...

Daniel Tabbush

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