Financial Industry 08 (Aug 23 - Dec 26)

[winston]

Analyst Who Called Chinese Bank Turmoil Says Trusts Are Next

The analyst who predicted the troubles that cascaded through China’s regional banks four years ago now has similar warning for the nation’s $2.9 trillion trust industry.

Of the 55 trust companies that issued financial statements for 2022, 14 reported non-performing and special mention assets that topped one third of their total assets.

Many of the 13 firms that didn’t report could also be in trouble.

Trusts typically take deposits from wealthy individual investors and companie,s to make investments in stocks, bonds and others assets, including loans to firms that can’t access traditional banks.

Trusts, which operate with fewer regulations than banks, account for almost 10% of total loans in China.

Source: Bloomberg

https://finance.yahoo.com/news/analyst- ... 00242.html

[winston]

SINGAPORE BANKS: TO EXIT OR DOUBLE DOWN?

From the pandemic lows in March 2020 till now, Singapore banking stocks have recovered almost 70% on average – a credible performance over a period of less than four years.

In the last three months, shares of DBS & UOB have declined, reflecting the expected softening in the macroeconomic environment in 2024.

With the recent share price corrections, valuations have similarly come off.

Based on the FTSE ST All-Share Financials Index, price-to-book (P/B) is now at 1.2x versus the recent high of 1.4x in Feb 2022.

We do not deem this to be excessive especially since profits have grown tremendously in the past 10 years.

In FY2014, the combined net profits of the listed Singapore banks amounted to SGD11.1b. By 9-month FY2023, this swelled to SGD17.5b.

On an annualised basis, profits have more than doubled in the last 10 years. This speaks of the transformation and the diverse earnings streams of the local banks.

When compared to other peers, valuations are also not expensive and at the lower end of the valuation spectrum.

We have an overweight on the Singapore banks. DBS [DBS SP; FV: SGD39.00] is our top pick in the local banking sector, and UOB [UOB SP; FV: SGD32.50] is a BUY.

Source: OCBC

[behappyalways]

Unrealized losses at US Banks now represent just over 30% of their equity capital.

The BTFP expires in March. Should be interesting to see what's next.
https://twitter.com/AyeshaTariq/status/ ... 4487162094

[behappyalways]

How Bankers Are Exploiting The Fed's Bailout Program At Your Expense
https://www.zerohedge.com/markets/how-b ... ur-expense

[behappyalways]

Banks Terminate 60,000 Workers In One Of The Bleakest Years For The Industry Since 2008
https://www.zerohedge.com/markets/banks ... yment-2008

[winston]

by behappyalways

More smaller banks in China are being merged into larger banks, with 16 small banks disappearing in the past month.

"The faster pace of M&A is aimed at solving the financial risks these smaller regional lenders have built up over recent years."

https://twitter.com/michaelxpettis/stat ... 3954376958

[behappyalways]

Troubled China shadow bank Zhongzhi files for bankruptcy
https://www.theedgesingapore.com/news/b ... bankruptcy

[winston]

Singapore Banks - 4Q23F: Expect some seasonal softness

Updated management guidance on FY24F NIM trajectory, portfolio credit quality, wealth fees and dividends to steer the sector’s re-rating/de-rating.

Reiterate sector Neutral. Drastic Fed fund rate cuts affecting NIMs are a downside risk but c.7% div. yields should retain investors’ interest in banks.

UOB is our sector top pick for better sequential performance. We think NIMs could be relatively more defensive vs. peers given its funding profile.

We expect DBS to declare final DPS of S$1.04, OCBC to declare S$0.43 DPS, and UOB to declare S$0.95 final DPS in 4Q23F.

Source: CIMB

https://rfs.cgsi.com/api/download?file= ... 75f9f2f144

[winston]

China: Bad loans rise to 3.95 trillion yuan

The regulator also revealed that 3 trillion yuan worth of bad assets was disposed of in 2023.

Source: The Standard

https://www.thestandard.com.hk/section- ... llion-yuan

[winston]

China is embarking on the biggest consolidation of its banking industry by merging hundreds of rural lenders into regional giants amid growing signs of financial stress

After engineering mergers of rural cooperatives and rural commercial banks in at least seven provinces since 2022, policymakers look to tackle risks in the $6.7 trillion sector this year.

That means another wave of consolidation is on the way across the nation.

“It’s where risks are the most concentrated among smaller financial institutions, so China is pushing the reform at a faster pace,” said Liu Xiaochun, deputy director of think-tank Shanghai Finance Institute.

Source: Bloomberg