Financial Industry 07 (Jul 18 - Dec 24)

[winston]

SG Banks: Headwind from cooling measures

With last evening’s unexpected property cooling measures, in terms of timing, we expect the initial knee-jerk reaction to result in further weakness in banking stock prices, although the impact is likely to be to a smaller extent than the property stocks.

While this will not hurt the current mortgage portfolio for the three banks for now, new loans growth could come off in line with the slowdown in property transactions in the coming quarters.

In terms of loan book, housing loans accounted for about 22% of DBS’s loans portfolio, 26% for OCBC and 28% for UOB in 1Q18.

Based on the previous round of cooling measures in 2013, the FSTFN (FTSE ST Financial Index) fell about 1.5% the following day before gradually recovering over a few days.

For this year and because of trade tensions, the FSTFN has already fallen about 11% from Jan 2018 high.

We are still fairly positive about the other revenue contributors for the banks, but we expect this headwind to be a dampener on short term share price performance.

For longer term investors, short term price weakness could present a good opportunity to gradually buy into banking stocks.

Source: OCBC

[winston]

Malaysia: Lower earnings seen for Malaysian banks in H2

Non-interest income and net interest margins (NIMs) of banks could take a further hit, resulting in lower earnings for banks in the second half (H2) of the year.

Softer capital market fuelled by a rising trend in Malaysian government securities (MGS) yields, which could dampen bank investment and trading income.

Slower capital raising from the equity market is anticipated, which could dent non-interest income earnings.

The upcoming Basel III NSFR is to be implemented no earlier than Jan 1, 2019.

Source: The Star

https://www.thestar.com.my/business/bus ... KEsV1zm.99

[winston]

China banks bad loans surge most on record amid deleveraging

Non-performing loans rose 183 billion yuan (S$36.7billion) to hit 1.96 trillion yuan by the end of June, the biggest quarterly jump in data going back more than a decade, the China Banking and Insurance Regulatory Commission said in a statement on Monday.

Soured loans represented 1.86 per cent of total advances, the highest ratio since March 2009.

Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, The Business Times, PSR

[winston]

Banks Are Becoming Obsolete in China—Could the U.S. Be Next?

Source: Truth Dig

https://www.truthdig.com/articles/banks ... s-be-next/

[winston]

Wall Street’s dream of prying open China’s US$45 trillion market is inching toward reality

UBS, JPMorgan and Nomura have applied for majority stakes in their Chinese ventures, while Morgan Stanley and Credit Suisse are expected to apply

Goldman Sachs, Citigroup and Bank of America haven’t applied

At US$5.6 trillion and US$11 trillion, respectively, the country’s equity and debt markets are the world’s third largest.

Source: SCMP

https://www.scmp.com/business/banking-f ... ion-market

[winston]

China commercial bank bad loans soar to 2 trillion yuan

The China Banking and Insurance Regulatory Commission says third-quarter commercial bank non-performance loan balance increased by 75.1 billion yuan from the last quarter to 2.03 trillion yuan, the highest since 2009.

The non-performance loan ratio was 1.87 percent, up 0.01 percentage point quarter-on-quarter.

The loan-to-deposit ratio also hit a high for the past seven years.

Source: The Standard

http://www.thestandard.com.hk/breaking- ... r=20181120

[winston]

China’s Banks Are Desperate for Capital

by Christopher Balding

China: 267 trillion yuan ($39.4 trillion) of total assets.

Major Chinese banks raised or announced plans to raise 343 billion yuan in 2018, according to a recent note by Nomura Holdings Inc.

That’s well below the estimates of UBS Group AG, which just last year said these firms would need 1 trillion to 3 trillion yuan, depending on the targeted capital-adequacy level.

Neither forecast counts the additional funds the big four banks need to meet Basel III requirements for systematically important institutions by 2024.

Despite talk of deleveraging in 2018, as nominal GDP growth slowed to 9.7 percent, total loans outstanding grew 13.5 percent.

To prop up the economy, Chinese banks have been lending well in excess of deposit growth.

Since the beginning of 2016, as loans outstanding grew 41 percent, deposits rose just 29 percent. That put balance sheets under increasing strain.

Officially, capital adequacy ratios improved to 13.8 percent in 2018 from 13.4 percent two years earlier.

Source: Bloomberg

https://finance.yahoo.com/news/china-ba ... 23834.html

[winston]

Singapore Banks - Through the fog of war | POSITIVE

The sector has contracted 8% in the past 2-weeks.

Operationally, the troika of rising margins, positive loan growth & benign asset quality should continue to deliver higher ROEs.

Current trade war tensions present a significant macro risk for near term performance, but the sector's structural changes provide it with a strong platform to respond.

We have tweaked earnings and TPs 1-3% for our coverage, but our recommendations remain intact: BUY UOB and DBS, HOLD OCBC. POSITIVE

Source: Kim Eng

[winston]

The 10 Biggest Banks in the World

BY KEVIN B. JOHNSTON

Source: Investopedia

https://www.investopedia.com/articles/i ... yptr=yahoo

[winston]

China: Domino #2: Chinese Bank With $105 BN In Assets On Verge Of Collapse

by Tyler Durden

https://www.zerohedge.com/news/2019-06- ... e-collapse