ACB_4Q20_Strong earning quality

TP upside (downside) -7%
Close 26 Jan 2021
Price                          VND 27,800
12M Target              VND 25,690

Event

ACB reported 4Q20 PATMI of VND2.6 tn (+23% QoQ/+63% YoY) driven largely by increased net interest income and other non-interest income. In 2020, ACB’s PATMI reached VND7.7 tn (+28% YoY), fulfilling 121% of our forecast.

Details

Loan growth was 16% YoY vs the sector average of 12%.

4Q20 net interest income was VND4.4 tn (+21% QoQ/+33% YoY).

NIM on total average assets was 4.09% in 4Q20 (+53bps QoQ/+50bps YoY) due to its improved CASA ratio and SBV easing.

CASA deposits continued to improve. ACB’s CASA ratio was 21.6% as at 4Q20 (+2.5ppt QoQ/+2.5ppt YoY).

4Q20 net fee income was VND406 bn (-17% QoQ/-16% YoY). Other non-interest income was VND308 bn (+24% QoQ/+61% YoY).

4Q20 operating expenses was VND1.8 tn (+2% QoQ/ but -36% YoY). Adjusted CIR declined to 43% (-14ppt YoY) in 2020.

4Q20 provisioning soared +52% QoQ/+121% YoY to reach VND247 bn, and full-year provisioning in 2020 was VND941 bn (+244% YoY). The reported NPL ratio was 0.59% (-24bps QoQ/+5bps YoY). Total aggregate NPLs were VND1.8 tn (-26% QoQ/+27% YoY).

ACB’s LLR ratio was 160% (+43ppt QoQ/-15ppt YoY) in 4Q20. This is among the highest reserve coverage ratios in the sector.

Our view

Asset quality has been boosted by increased provisioning, which we strongly recommend in order to prepare for reported asset quality deterioration going forward. The high LLR ratio will give ACB the flexibility to reduce provisioning and boost earnings in 2021.

Low NPL ratio. We expect ACB’s 4Q20 NPL ratio of 0.59% to be the lowest in the sector.

ACB trades at 1.3x 2021E P/B vs. the sector median of 1.4x. We believe that ACB deserves premium over its peers given its strong operational results and solid asset quality. Short-term catalysts might include upfront fee recognition from the bancassurance exclusivity deal and potential inclusion in several ETF-linked indices (i.e. VN30, VNDiamond, and VNFinlead).

For the complete report, please access here: ACB_4Q20_Express note

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