Osb Share Discussion Threads

[popit] 09/3/2024 21:04

BGEO is also good but the Price to Book is beginning to look very big at 1.6

STB or Barclays for example is less than 0.4

And most of the other UK listed banks are not much more

[flyfisher] 09/3/2024 08:53

Thanks for the replies.

Both TBCG and BGEO were on similar forward p/e's to Halyk a year ago, they have both had a strong re-rating, but they benefit from greater liquidity.

Were Halyk UK or European listed and more liquid, then i would show more interest.

[popit] 09/3/2024 06:05

apple53

Thanks for the reply

Yes there is a chat here on advfn for Halyk but there has only been one post from one poster last year and unfortunately there was no reply

They are probably off the radar for the vast majority of investors because of the location and geopolitical concerns

I read various Substack articles and recommendations on Halyk such as this one last year and the valuation seemed to be very good with a forecast PE of less than 3 and dividend of over 15%

Capital ratios also seem to be fine at over 18%

They dominate in their local Kazakhstan market with about half the population as customers and the economy should also benefit from huge future growth given the strategic location in Central Asia and good economic relations with all countries including western countries and BRICS countries

The share price has doubled since the lows of 2022 but I see no reason why it should not double again to about $40 and higher

I think OSB and STB also look great value but it is difficult to find a better value bank than Halyk

hxxps://moderninvesting.substack.com/p/halyk-bank

[apple53] 08/3/2024 21:57

Yep flyfisher. Essentially Nazarbayev, via son-in-law TK. It's a useful reminder - may impact preferences for dividends vs buybacks for example. Normally there is a risk of related-party lending in such situations, or of gov't-mandated lending. Pre-2009 Marchenko would have none of that, and hopefully Umut learned from her boss. Now the Nazarbayev family are no longer in direct control of the country, I guess there is less risk of gov't driven lending, but still worth keeping an eye on related party. This is a trip down memory lane for me but I'm missing most of the last decade.

[flyfisher] 08/3/2024 12:28

Halyk is majority owned by one family, they held in excess of 60% when i looked at it.

[apple53] 08/3/2024 10:31

Hi Popit

I used to look at Halyk very closely, but it was a long time ago. Massive benefit from cheap deposits (and from Marchenko's leadership). Also has benefited from rolling up the other large bust banks. I wanted to buy it during the turmoil in early 22, but first it was a falling knife, and then I kinda forgot.

I checked market screener for 1 min. It's incredibly profitable, it seems, especially given capital ratios these days. One reason may be that Kaz banks had to have higher capital ratios than normal Basel requirements previously, so the jump in capital has been less noticeable. Another might be lack of competition. In the old days high RoE was meant to translate formulaically into higher PE. Arguably such high RoEs are unsustainable, but I have no idea what would bring them down and when. Such a high RoE means massive cashflows to fund big dividends as well as any growth (are they able to buy back shares?).

There has to be political risk, of course, given the arbitrary nature of government and the reduced credibility of the central bank. How are the capital ratios?
But yes even so incredibly cheap despite the share price recovery.

Is there a share chat? It would be good to look into it more, but I would love to share the labour.

[popit] 07/3/2024 16:00

apple53

I agree that OSB and STB look very good value

Have you looked at Halyk Bank?

It also looks very cheap with a forecast PE of about 3 and a 15% yield

[thebutler] 07/3/2024 10:13

Great to see this recovering and well done to all those who had the balls to top up when it got bashed to £3.

With branches being closed and banking becoming much more streamlined and cost efficient I can see much consolidation with the small banks and Virgin is only the start imo, especially when they are so cheap.

[riverman77] 07/3/2024 10:03

STB a bit small, but might be of interest for its V12 retail finance division - seems to be well respected in this niche and might appeal as a bolt on for one of the bigger banks.

[apple53] 07/3/2024 09:36

I had sold a modest chunk on the initial pop. Switched them into STB which is down, presumably because people think it's too small for a deal.

[lord gnome] 07/3/2024 09:19

I think I might just be persuaded to take 780p. Where do I sign?

[apple53] 07/3/2024 08:57

I didn't get down as far as v in my watchlist before googling osb.
I normally own some virgin. This reminds me why I should always have a spread of holdings. v. annoying.
This is mixed news for the small banks. The takeout is at below 7x 2025 earnings (despite recent downgrade to forecast for 25 vs upgrade to 26). Takeouts in the old days were 12 to 15x. I guess this helps to fix the short term issues flyfisher mentioned - cheap Nationwide funding.
So on the same multiple OSB is 780p. I still think OSB is a superior business to VMUK, but certainly more synergies buying VMUK.

[orchestralis] 07/3/2024 08:38

Poss reaction to virgin money deal?

[eigthwonder] 07/3/2024 08:32

VMUK bid read across

[jonnybig] 07/3/2024 08:25

Results a week today. Maybe some good news ahead?

[lord gnome] 07/3/2024 08:10

I think this qualifies for a 'whoosh'. But what lies behind it?

[apple53] 07/3/2024 08:10

anyone see any news today?

flyfisher thanks for the additional detail. I was going to mention the covid repayments but didn't know the details.

[flyfisher] 03/3/2024 18:39

apple, Any opinion on future profits of banks is incomplete without considering TFSME repayments and basel 3.1 requirements.

TFSME is repayable from 2024 to 07/25. STB for example has around £400m tfsme drawings to repay. It would seem that it will have to attract deposits and issue bonds or shrink the loan book. Can it place a bond of any real size and at what rate, it would certainly be well above tfsme rate, can it pass on the additional cost?

Similarly basel 3.1, the BOE has commented that it will take an average of 3% additional cet1 capital for firms to comply. Average, so who are less than average and who are worst than average, and can they earn that capital or will they have to look elsewhere?

OSB have made a start on tfsme repayment, with an increase in the deposit book, a couple of large bond issues and a £520m securitisation made in recent months.

For clarity, i hold two bank stocks.

[apple53] 02/3/2024 20:07

I posted something on the STB chat in response to some intriguing points.
You might thing it arrogant but someone might find it useful if I repost here. AND I would find it useful if anyone wanted to argue or add. Some of my knowledge is out-of-date, and some of my numbers merely educated guesses.

Here goes:
QUOTE
I agree this is a great opportunity for investors. I don't agree with your view on rates or growth etc., and I wrote the following to remind myself of history and the investment case for these banks.

Higher rates tend to benefit earnings, though much higher rates are typically thought likely to increase bad debt charges. Materially higher rates and a high recession risk is normally enough to hit multiples. [it is important you don't have silly regulators that require you to buy reams of government bonds at low interest rates - this is what killed SVB and, arguably, First Republic].
Overall, though, there isn't really any correlation between rates and multiples.
'Any growth' doesn't tend to drive the share price violently up. Balance sheet growth requires capital, and more than it used to under Basel 1/2. In the case of STB the drive for rapid growth probably hit the share price, as it required a dividend cut, and also because some shareholders are rightly scared of rapid growth in bank balance sheets. One of the clearest correlations (with causation) in banking is rapid growth and subsequent high (sometimes disastrous) bad debts.
Bank investors 'normally' like modest balance sheet growth, faster growth in fee income, a low level of dealing income and an expectation of a falling cost income ratio.

Historically, banks have traded at 8-15x forward eps. It is only in the past few years that 5x earnings has been considered normal, and this in Europe, but not the US, where 9-12x is more typical.

What is doubly weird about the ridiculously low multiples is that UK banks are much much safer than they used to be. Equity capital ratios are 2.5-4x higher than in the noughties. [There is a downside to this - RoEs are lower, and incremental growth needs more incremental capital]. They are also encouraged to ex-ante provision (which is good as it helps to smooth provisioning across the cycle). Overall CoE should be lower.

None of this means that banks are immune to property market collapses. Some (US) banks are over-exposed to commercial property (NYCB). This has been the cause of most bad debt crises (as opposed to the liquidity crisis post-Lehman). Resi mortgages are also at risk from a big increase in unemployment, double digit interest rates, 40% falls in value (each in isolation) or a milder combination of the 3.
The other risk to banks is social media, which magnifies problems that used to swept under the carpet, such that issues which might have been manageable with a couple of year's retained earnings can now be enough to cause a run.

STB is probably the weirdest example (and could be the cheapest bank in the developed world), but OSB stands out even more. STB is tiny; OSB merely small. STB is building a growth track record; OSB already has one. STB is modestly profitable; OSB is very profitable (for a modern bank). STB is modestly at risk from an increase in bad debts; OSB is highly cushioned - it has SUCH a low cost income ratio that its leverage to an increase in bad debts is almost the lowest in the industry. If it was 10x the size and based in the US it would trade at twice the valuation or more.

I have no idea when this situation will 'normalise', but in the mean time these banks need to buy back their stock (and I would happily forgo some yield to fund this).
UNQUOTE

[lord gnome] 01/3/2024 10:06

Going up on no great volume but you never know what's going on behind the scenes. Whatever, enjoy it while it lasts.

[thebutler] 01/3/2024 09:39

Hey up, what's going on here then?

[lord gnome] 08/2/2024 15:49

And back to square one. Ho hum.

[thebutler] 08/2/2024 13:34

Nobody can read the Market (even though some pretend they can) otherwise we would all be millionaires.

Good strength here. Glad I took advantage of sub 300p which significantly brought down my average. Personal price target of 550p before cashing in.

[lord gnome] 08/2/2024 13:29

OSB in demand again today. This does tend to bounce around. A good trading share if you can read the market. I can't.