ACB_1H21 Analyst Meeting_Key Takeaways

Key takeaways

Credit growth reached 9.4% YTD vs. the initial quota of 9.5% YoY. The SBV granted ACB a new credit growth quota of 13.5% for 2021. 2Q21 net interest income (NII) was VND4.9 tn (+5% QoQ/+57% YoY). 1H21 NII was VND9.5 tn (+45% YoY).

Strong fee income driven by bancassurance sales and upfront fee. Parent bank’s 2Q21 fee income was about VND698 bn (+12% QoQ/+64% YoY). 1H21 fee income was VND1.3 tn (+79% YoY).

The bank reported CIR of 29.6% as of 2Q21 driven by one-off reversed provision, cost-cutting and upfront fee recognition. ACB expects normalized CIR (excluding one-offs) to reach 40% for 2021E.

2Q21 parent bank’s provision was VND1.4 tn (+128% QoQ/+206% YoY). For the 1H21, ACB provisioned VND2.0 tn (+267% YoY), of which the bank made fully provision of VND1.4 tn for restructured loans instead of allocating in 3 years according to Circular 03. Total restructured loans as at 2Q21 was VND8.2 tn (2.5% of 1Q21 loans).

PBT reached VND3.3 tn in 2Q21, up +4.7% QoQ and +71.6% YoY driven by high credit growth and strong fee income. Preliminary 1H21 PBT reached VND6.4 tn (+66.4% YoY), completing 60% of the bank’s full-year target and 55% of our forecast for 2021E.

NPL ratio was only 0.7% as at 2Q21 (-21bps QoQ/+2bps YoY), and loan loss reserve (LLR) ratio was 204% (+83ppt QoQ/+59ppt YoY).

Management view

Net interest income and NIM for 2H21 will be flat or lower than that of 1H21. ACB announced that it will cut loan yield up to 1% to support all of its customers, and this will offset the increased loans in 2H21.

Fee income will be the key driver for total revenue growth going forward, mainly focusing on banaccasurance, card services, and trade services. ACB is in the top 3 in bancassurance in terms of annual premium equivalent (APE).

Expanding customer based. The management targets to increase 1.0 million new clients in 2021E. Currently, ACB has 3.4 mn active clients.

The bank will focus on risk management in the 2H21, and it will continue to make provision to maintain LLR at the 2Q21’s level.

Our view

Asset quality remains strong. High LLR ratio reflects ACB’s prudent approach to weather probable asset quality deterioration. Similar to VCB and MBB, high LLR will allow ACB for a greater flexibility than other banks to lower provision and boost earnings in the future.

ACB trades at 2.0x vs. the peers’ median of 1.9x given its superior operational quality vs the sector. We believe ACB to deserve a premium over its peers. However, ACB’s share price has increased 47% YTD and  is now 10% above our TP. Thus, we recommend to wait for a pullback.

For the complete report, please access here: ACB_1H21 Analyst Meeting_Key Takeaway

Analyst: Tanh Tran, tanh.tran@yuanta.com.vn