Financial Industry 07 (Jul 18 - Dec 24)

[behappyalways]

Banks' Usage Of The Fed's Emergency Facility Hits New Record High As Money-Market Fund Inflows Resume
https://www.zerohedge.com/markets/banks ... ows-resume

[behappyalways]

Banks' Usage Of Fed's Emergency Funds Jumps To New Record High, Money-Market Inflows Soar
https://www.zerohedge.com/markets/banks ... flows-soar

[behappyalways]

We leave you with one thought - in 6 months and counting, America's 'smaller' banks will need to find that $108-billion plus from somewhere as that is when the BTFP bailout program ends (theoretically).

Small US Banks Suffer Biggest Deposit Outflows Since SVB Crisis, Money-Market Inflows Soar
https://www.zerohedge.com/markets/small ... ney-market

[winston]

CHINA: RENEWED MARGIN PRESSURE FOR CHINESE BANKS

MSCI China Financials Index outperformed MSCI China Index by 6.8 percentage points (ppt) in 1H23.

But the relative outperformance has reversed after the ex-dividend date with the sector corrected 6.5% since then and underperformed the broad market index by about 3ppt as shown in Exhibit 1.

We expect ongoing net interest margin (NIM) pressure from repricing of existing mortgages, potential further downward adjustment to market rates, weak fee income and renewed concerns on asset quality would cap Chinese banks from a sustainable re-rating.

Overall, we expect the sector to underperform the broader market.

While Chinese banks as a sector is offering close to 9% dividend yield, we prefer other quality defensives. Chinese Telcos and Chinese Energy could be considered as alternatives.

We also prefer HK international banks to ride on the “higher for longer” interest rate environment. Within Chinese banks, we remain selective and prefer Bank of China (3988 HK, Fair value HKD3.65) as shown in Exhibit 2.

A series of supportive easing measures have been introduced since late August, some of which have implications on Chinese banks. These have reiterated our thesis that Chinese banks’ NIM pressure is likely to persist amid more “national services” obligations to support growth.

Among the latest real estate-related easing measures, repricing of existing mortgages could exert further pressure on Chinese banks’ NIM. It is estimated that Chinese banks’ NIM and earnings could potentially be cut by about 4-6 basis points (bps) and 3-4% respectively in 2024 on a static analysis basis.

That said, the impact could be partially offset by potential deposit rate cuts and some other offsetting factors.

The latest universal 25bps reserve requirement rate (RRR) cut would also help lower banks’ funding cost, partially offsetting NIM pressure from the repricing of existing mortgage rates and preserving banks’ lending capacity to support the economy.

The RRR cut could boost Chinese banks’ NIM by about 0.4bps on a static analysis basis but it could be offset by lower market rates.

The latest results also highlighted that Chinese banks’ underlying fundamentals have not turned around with NIM and fee income were weaker-than-expected in 2Q23, driving pre-provisions operating profit (PPOP) dropped 3% year-on-year (YoY) as shown in Exhibit 5 and 6.

Having said that, Chinese banks as a sector posted stable earnings growth owing to lower credit costs.

Source: OCBC

[winston]

Singapore: Banks
Loan growth remains negative

Banking system loan growth stayed subdued, contracting 6% yoy in Aug 23. Shrinkage was broad-based. We see muted bank loan growth in 3Q23F.

Overall system growth slowed to +3% yoy in Aug 23 but S$ deposit growth outpaced FCY deposits. CASA is still contracting and FD growth slowing.

Reiterate Neutral. A higher-for-longer interest rate scenario may bode well for NIMs but we are cognisant of potential asset quality pressures.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... c8e04880b5

[behappyalways]

"US banks held $5.436 trillion in debt securities... these securities lost $140bn in value during the quarter... Cumulative unrealized losses were $558.4bn in Q2 and have now surpassed the previous peak of $689.9bn in Q3 2022."
https://twitter.com/zerohedge/status/17 ... 2529628496

[behappyalways]

Singapore banks to allow customers to 'lock up' funds in latest move to guard against scams
https://www.channelnewsasia.com/singapo ... re-3826756

[behappyalways]

The credit contraction is here. The year-over-year growth rate has turned negative for the first time in more than a decade
https://twitter.com/ETFProfessor/status ... 7860285453

[winston]

China’s regional banks facing US$300 billion loss, local government debt ‘pain could be too much to bear’

Regional banks could suffer a capital a loss of 2.2 trillion yuan (US$301 billion) from China’s local government debt crisis, according to S&P Global Ratings

Amid concerns over default risks from local government financing vehicles (LGFVs), regional banks had about 12 trillion yuan of exposure as of the end of 2022

by Amanda Lee

Source: SCMP

https://www.scmp.com/economy/china-econ ... n_business

[winston]

Singapore banks likely to report slower growth for Q3 amid weak loans, flattish net interest margins

by Tan Nai Lun

Source: Business Times

https://www.businesstimes.com.sg/compan ... attish-net