Posted by teoct > 2020-03-06 20:58 | Report Abuse

Thank you so much for all the hard work and sharing here.

Yes, I am also looking at DBS vs PBB. You have reinforced my conviction that DBS is a good buy. My take is DBS is in China, HK, Taiwan, India and Indonesia while PBB depended on Malaysia, while HK, Vietnam, Cambodia and Sri Lanka are small, very small.

India and Indonesia are still just breaking even to small loss, but the potential of these 2 markets is many time bigger than those of PBB.

And DBS is embracing tech in a big way compared with PBB. This is another plus point that should keep cost at bay going forward.

Thanks again and happy investing.

Posted by Flintstones > 2020-03-06 21:24 | Report Abuse

Good article.

Posted by Philip ( 2.3% fatality rate, 80% recovery rate age 10-40) > 2020-03-08 16:31 | Report Abuse

It's interesting how quantitative and qualitative approaches differ. You used pe, income and return on equity to judge the quality of a bank

For me the more important criteria I look for in a bank is the loan impairments ratio and the loan profile. My idea of the perfect bank is a huge savings and fixed deposit accounts, and a every loan protected by solid collateral.

All the criteria you used to define a banks quality leave out the loan profile and the inherent risks in those loans.

During the subprime crises all the investors only looked at how much they made, not the risk they take to make the money. In fact, only a few analysts tracked the loan impairments ratio, and the income group of the individuals making the loans.

When I bought public Bank in 2012, this became the core tender of my investing policy.

In scuttlebutt terms, " how much leverage is the bank giving out to the corporate company in relation to their assets and ability service the debt".

My ex company was able to borrow 25 million in cash and 25 million in overdraft, all with 10 million in assets simply by raising paid up capital to 10m and having a fixed deposit of 5 million and property values at 5 million.

The car loan I have on the other hand, is based on a 5 year loan with a collateral on the car worth 368,000, and where the interest is paid first during the first 1 year, and the principal paid off after that.

If you have ever borrowed money to your friends and family, you will know borrowing money is a risky business. Assuming that your friends will pay you back with interest and expanding out into the next 5-10 years is a very risky risky business indeed.

Maybank had hyflux. Alliance Bank has London biscuit.

You are saying it won't repeat. How do you even know who they loan to?

All I can say is, if you are someone that likes margin of safety, you should find the margin of safety in banks, aka how much profit does the bank gain in relation to the risk it takes from its customer group.

In any case, you should update your graph with their annual impairments of loan profile, their client base breakdown and the growth of those safe loans profile.

It's all there hidden deep in the notes.

Where most of the important things are.

Posted by Sslee > 2020-03-08 16:49 | Report Abuse

Agree with philip.
Wonder which bank lend money to sapura energy and insist ceo pay by hundred of million?

Posted by i3lurker > 2020-03-08 17:02 | Report Abuse

you did not manage to get the solution?

coz the ceo owe money to the bank for how much?

Posted by Sslee > Mar 8, 2020 4:49 PM | Report Abuse
Agree with philip.
Wonder which bank lend money to sapura energy and insist ceo pay by hundred of million?

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 17:04 |

Post removed.Why?

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 17:06 |

Post removed.Why?

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 17:23 |

Post removed.Why?

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 17:55 |

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Posted by Philip ( 2.3% fatality rate, 80% recovery rate age 10-40) > 2020-03-08 17:56 | Report Abuse

You forgot gross loans impairment.

Pbb 0.49%
Dbs 1.5%

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 18:02 |

Post removed.Why?

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 18:03 | Report Abuse

>>>
Philip ( 2.3% fatality rate, 80% recovery rate age 10-40) You forgot gross loans impairment.

Pbb 0.49%
Dbs 1.5%
08/03/2020 5:56 PM

>>>


I was too lazy to look it up. It will be reflected in the NIM. Thanks/

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-08 18:07 |

Post removed.Why?

Posted by Choivo Capital > 2020-03-09 15:33 | Report Abuse

This should be reflected in ROA?

Would be great if i could get the data though. Next time maybe.

===
Posted by Philip ( 2.3% fatality rate, 80% recovery rate age 10-40) > Mar 8, 2020 5:56 PM | Report Abuse

You forgot gross loans impairment.

Pbb 0.49%
Dbs 1.5%

Posted by Choivo Capital > 2020-05-24 16:51 | Report Abuse

Phillip,

I'm not sure if you're aware. But a high NPL etc will naturally flow to the PL, and the ROA. This is a sieve.

I don't usually do a NPL analysis unless i am doing an in depth study as the data is much harder to extract.

Feel free to do the same if you want.


No further comments on the commercial loans.

Non Privately held banks usually do alot of commercial loans because by doing so, they get to bolster their commercial current accounts and investment banking business. When it comes to commercial loans, if you get your money back its a good thing already.

Blame it on stupid incentives.

This means, for banks like Deutsche, DBS, Maybank, CIMB etc, i would always expect one extremely big surprise now and then.

This means they are usually not a good investment, unless its at the bottom of a crisis, or post a big fat impairment that really murders the stock price.

Having said that, one needs to note that, in some banks the rot runs so deep, that even if it survives the recession and you were to purchase it post right issues and near the bottom etc.

It can quite simply continue to die by a thousand cuts, and require constant right issues etc.

Deutsche Bank is the clearest example of this. If you bought the shares at the bottom of the financial crisis. You get a nice pop after, but if you held you would have still lost money today (even if you reverse covid stock losses)

Posted by gohku > 2020-05-25 11:35 | Report Abuse

Most of the malaysian banks are well capitalized to withstand the current financial challenges.

Should able to survive & thrive.