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Daniel Tabbush

China Banks - No corporate deleveraging, with high debt growth at weakest companies

It is a myth that China corporates are deleveraging. There is no indication of this from company data or from bank data. Rather, corporates are re-leveraging. Over the latest full year, total debt of China’s non-financial companies rose dramatically, by US$431 billion. This change is higher than any year in the past five and at 19% growth YoY, it far surpassed the previous three years. Our corporate data shows most growth was with the most distressed companies, those with debt/ebitda at >7x. This makes it important to understand that large banks are giving up corporate loan share, while small ...

Daniel Tabbush

Thai Banks - TISCO NIM expansion near best in Asia

The magnitude of Tisco Financial Group’s (TISCO) net interest margin (NIM) expansion is tremendous. Of 72 Asian banks, Tisco’s NIM expansion ranks third, at +108bps from 2015 to 1Q18. The figures are not flattered from being low, where its NIM is now 4.58%, one of the highest in Asia.

Daniel Tabbush

Philippine banks - PNB turnaround gathers momentum

The turnaround at Philippine National Bank (PNB) accelerates in 1Q18. Where the bank reinstated its dividend in 2016 it is still early days in its transformation. But 1Q18 data is reassuring. Net interest margins (NIM) rose to 3.44% in 1Q18 from 3.12% last year, and marks a directional change.

Daniel Tabbush

HDFC Bank - Surging credit costs may surprise some, but this may accelerate further

There is no major bank in Asia-Pacific that is growing loan as fast as HDFC Bank. Over the past two years, from FY16 to FY18, the bank expanded its gross loans from INR4,873 billion to INR7,000 billion. This 44% growth comes during a time of unprecedented weakness in the domestic economy, as evidenced by India’s banks having the highest non-performing loan (NPLs) ratios in the region. Average NPL ratios were 9.9% as at calendar year-end 2017 for India’s banks compared with 1-3% for others in Asia-Pacific. This does not include restructured loans, which as at the most recent fiscal year-end ave...

Daniel Tabbush

Krungthai Card - Unprecedented strength

 Krungthai Card PCL (KTC) was already one of Asia’s most profitable lenders during 2016 and 2017. With 1Q18 ROA at an unprecedented 6.7%, it makes historically high returns look paltry. This is despite recent Bank of Thailand (BOT) regulations implemented during September 2017, which lowered the maximum rate charged on credit cards from 20% to 18%.

Daniel Tabbush

Malaysia Building Society reveals best NPL improvements in Asean

Malaysia Building Society (MBSB) is one of Malaysia’s lesser-known financials and more of a specialized lender in personal loans. But major positive changes are happening. MBSB is showing some of the best improvements in credit metrics and returns of most any bank in Asean, let alone in Malaysia.  With MBSB’s recent acquisition of Asian Finance Bank (AFB), MBSB is moving forward. It will now transform itself to a full-fledged Islamic bank. Merger risks are now lessened and the bank completes its transformation by April 2018; when it marks its Islamic bank operational readiness and a full...

Daniel Tabbush

China banks - Souring NPL mix

For 16 China banks with non-performing loan (NPL) distribution detail, loss NPL growth was 63% YoY in 2017. There is marked deterioration in the worst category of NPLs, where banks are least likely to be repaid and that require the most loan loss reserves (LLR). What these figures conceal is far greater distress at four banks, where loss NPL growth averaged 165% YoY.

Daniel Tabbush

Malaysia Building Society reveals best NPL improvements in Asean

NPLs are in sharp decline, its merger is nearly done, and in April it re-brands. ROA doubled last year, but it's not finished. Having the best capital position in Malaysia, means its especially safe, but also that it can maintain a high payout. We see only three analysts covering the bank, where profit estimates for 2018 seem far too low.

Daniel Tabbush

China banks - Unprecedented weakness in asset growth

China banks' asset growth has not been lower in 11 years. Even the paltry 7% rate currently, is flattered from a  higher share of government lending. Decelerating lending to other financial corporations is also a critical signal. There are negative implications for bank earnings. The gap between perception and reality of China's economic and lending strength, grows.  

Daniel Tabbush

US - Credit frailty at the fringe

US credit metrics are worsening. This is contrary to what most believe, and most visible at the fringe. Where interest rate increases in the US are not driven by increased demand for money but rather Fed policy, the risks of loan defaults are exacerbated. The reality is that net-charge offs (NCOs) and loan loss provisions (LLP) are rising dramatically for many consumer lenders in the US, suggesting an underlying frailty. And when consumer lenders start blaming theirmodels, we know something is wrong.

Daniel Tabbush

UOB - Soaring NPLs & collapsing coverage

Despite higher oil prices in 4Q17, United Overseas Bank (UOB) reported a steep quarterly rise in non-performing loans (NPLs). In absolute terms, the bank’s NPLs have not been higher in the past 12 years. UOB’s NPLs rose to S$4.2 billion in 4Q17 representing 12% growth QoQ. Despite this, the bank aggressively ran down NPL cover and also despite 60% higher 'Loss' NPLs. This is not sustainable. 

Daniel Tabbush

Tisco - Quietly surpassing Thai peers

Tisco now reports the best margins in Thailand, the best ROA improvement, and still with conservative NPL cover and lending.  With margins at 4.84% in the latest quarter, it not only surpasses all Thai peers, but most all banks in Asia-Pacific, with Indonesia as the only exception. 

Daniel Tabbush

HDFC Bank - Oversized Loan Growth

We believe it is not well understood how aggressive HDFC Bank has been at adding new credit risk during the prolonged economic downturn and that it is  a driving force for the bank's accelerating credit costs, more so than most peers. The risk is that this continues, and it is far from what most expect for this beloved bank. 

Daniel Tabbush

China Bank Profit - Worsening Risk

China’s banks will see increased credit costs and worsening returns in 2H17 and 2018. Data from the National Bureau of Statistics is telling. The China Business Cycle Signal Index is low and similar to periods when the economy was fragile and when banks saw rising bad loans. The 10-variable composite index is 30 points lower than its critical 100 level, above which is considered ‘expansionary.’

Daniel Tabbush

HDFC Bank - Revealing risks

With a newly classified NPA, far higher credit costs, HDFC Bank appears less immune than ever. We show its high NPL ratios in many sectors, but eseentially invisible due the bank's aggressive consumer loan growth. Risks remain as the bank has expanded aggressively, even in weak sectors, alongside an economic downturn. 

Daniel Tabbush

HSBC - Deficiencies and inadequacies on a global scale

There is little evidence that HSBC’s sprawling footprint supports connectivity across customers and geographies. Its non-interest income compares poorly with peer large banks, while its fee income continues to come down. Net insurance income has been in loss for years. A broad gauge of operating returns - operating income/assets - continues to trend lower and where this is not distorted by credit costs. If HSBC were benefitting from its unique global position, these measures would appear more robust. It is a long-standing misperception; the reality is different. The track record of HSBC to at...

Daniel Tabbush

India - Bank recap misses the point

The Reserve Bank of India (RBI) proposes to recapitalize state banks with INR2.1 trillion of capital. This misses the point: non-performing loan (NPL) formation. In the first place, this new capital does not address weak companies; sector-specific stresses; corruption, inefficiencies rife at state banks; or risk-management system, processes at banks. Secondly, the amount is simply too low considering NPLs, restructured loans and total equity.

Daniel Tabbush

Vietnam Prosperity Bank - Unfamiliar, eminently profitable, with smart growth

Suddenly there is a top-10 bank listing in Vietnam, where even data vendors have not fully taken notice. We must surmise that commentators and analysts have also limited knowledge of this highly profitable bank. In of itself this creates opportunities, but ultimately Vietnam Prosperity Bank’s (VPB) financials stand on their own merit, and set within a young demographic and high growth region. VPB is like no other in the Vietnam, and fairly unique in Asia-Pacific. Its emphasis is on unsecured consumer lending, unlike for most banks, which focus on corporate lending. With a net interest ...

Daniel Tabbush

KTC card – A striking bank alternative

The ultimate consumer bank in Asean is not a bank at all, but rather a credit card issuer and personal loan provider. Krungthai Card Public Co. Ltd. (KTC) is a credit card company in Thailand, one of just several listed in Asia-Pacific and one of the few listed in Asean. For the most part credit card segments are contained within banks so that KTC offers a rare direct exposure to this high return consumer finance business. KTC borrows at 3-4%, lends at 20-28%, with credit costs at 6% of loans, in a country which is not yet saturated and where banks are losing market share.

Daniel Tabbush

Telling gritty detail at China Merchants Bank

We wonder if new and granular disclosure by China Merchants Bank (CMB) provides rare clarity on the true credit quality of China’s banks? Under the liquidity coverage ratio (LCR) guideline from the Basel Committee on Banking Supervision (BCBS), banks must calculate how they can handle a 30-day stressed liquidity scenario. CMB saw its LCR decline sharply from 115% to 83%, from 4Q16 to 1H17, well below to what will be required.

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