YouSaid · the spoken record

John Hempton

lines on the record: 55
first: 2019-08-19
most recent: 2019-08-19
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“So they look like they're marginally profitable at the moment, but they're in fact marginally loss-making before credit losses.”
2019-08-19 · Odd Lots · John Hempton on What's Ailing Bank Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And it costs more than 68 basis points to administer the bank. You've got to have branches, you've got to have staff, etc. And so on increment, on current business, the Japanese banks are loss making before credit losses. They don't even need a credit loss to lose money. If they have credit losses, that's just sort of extra juice to the capital distraction. It doesn't show in their accounts. And the reason is that they have a bunch of ways of turning capital gains into interest income, the most obvious of which is that they've held a lot of JGBs because they have loan deposit ratios of sort of 0.6.7. Held a huge number of JGBs as rates have come down. They've got huge capital gains. They've been clipping those capital gains all the time and calling it interest income.”
2019-08-19 · Odd Lots · John Hempton on What's Ailing Bank Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Recently the most interesting thing I've seen is by a guy called Shannon McGonaky, who runs a fund for horseman capital, a Japan focused fund. He's in Australia. I'd never heard of him before at this interview. But he was running through Japanese regional banks, which are the lowest margin banks in the world. And he says, and I haven't verified the number, but I believe him because it sort of matches my on-the-ground observations, that the average interest rate achieved on a new loan in a Japanese regional bank this year so far has been 68 basis points.”
2019-08-19 · Odd Lots · John Hempton on What's Ailing Bank Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“2008 it was sub two. And the problem is that when your revenue to risk weighted assets went down that far, even small credit losses blew you up. Now, the beauty of the American banking system was that the revenue to risk-weighted assets never went below about four and a half. You know, during the crisis, the banking sector had 330 billion, I think was the number of pre-tax pre-provision income. And if you've got a trillion dollars of losses, you can write that off over three years. And as long as you can extend and pretend enough, you never actually go sub-profitable. And they raised a lot of money and they sort of came through. The English banks didn't have enough revenue, and the German banks spectacularly didn't have enough revenue, right? Because the German banks are the thinnest in the world. But all of this margin collapse happened in a positive interest rate environment.”
2019-08-19 · Odd Lots · John Hempton on What's Ailing Bank Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Predated that right this was pre crisis. Lloyds was ferociously profitable in 1998. Its revenue to risk-weighted assets was north of Act. By 2008, its revenue to risk-weighted assets was sub two.”
2019-08-19 · Odd Lots · John Hempton on What's Ailing Bank Stocks · IDENTIFIED FROM THE TRANSCRIPT · source