Bank Sector_2Q22 Earnings Preview

We forecast 2Q22 PATMI to decrease by -9% QoQ but increase +36% YoY in aggregate across the 27 listed banks. The expected sequential decline is largely due to the high base of non-interest income one-offs in 1Q22, most notably VPB’s c.VND5-6 trillion upfront bancassurance exclusivity fee. We estimate net non-II to decrease by -30% QoQ overall, or -5% QoQ after adjusting for one-offs, on subdued credit- and investment-related fees and other revenues.

2Q22 net interest income to increase by +3% QoQ /+14% YoY. Credit growth was tepid in 2Q22 as most banks reached their initial credit quotas and are now waiting for the SBV to allocate increased quotas.

2Q22 fees to increase by +5% QoQ/+15% YoY. Bancassurance sales might be low in 2Q22 given tepid credit growth and risk-off sentiment.

We expect opex to increase by +5% QoQ /+15% YoY in 2Q22. Opex typically falls QoQ in the first quarter but increases in the second quarter.

Turning the page on asset quality. COVID-related restructured debt peaked in Dec 2021 and has since declined. However, we still expect 2Q22 provisioning to increase by +5% QoQ, as low-LLR banks may still need to prepare for increased NPLs after C.14 expires on Jun 30.

Banks should receive higher credit quotas in 3Q22, although booming GDP growth suggests that the SBV may see no need to rush, in which case the Street’s expectations/hopes for quotas to be increased in July may prove to be a bit aggressive: We reckon that August is more likely.

Attractive valuations. The sector trades at a median of 1.2x 2022E P/B with 2022E ROE of 21% (source: Bloomberg consensus).

We continue to recommend sticking with high-quality banks. This preference is reflected in our list of top picks in the sector: VCB, MBB, and ACB. We also have BUY recommendation on STB and VPB.

For the complete report, please access here: Bank_Sector_Preview_2Q22E

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