Banks: CAMEL and Company Updates — The Sector Is Still Cheap

We maintain our loan growth forecast for MBB at 18% YoY for 2024E which is higher than MBB’s target of 16%, given the expectation of an economic recovery and a reward for MBB’s involvement in restructuring a weak bank.

Strong deposit franchise, with the highest CASA ratio (CASA/customer deposits) in the sector of 40.2%, should help MBB sustain high NIM. We expect CASA ratio to improve to 41% in 2024 as term deposits become less attractive due to reduced deposit rates. We forecast NIM to reach 4.86% (+7bps YoY). Ceteris paribus, a 1ppt increase in CASA ratio will help MBB save VND339 bn in interest expense.

MBB can also be able to boost its NIM by increasing exposure to retail lending (see page 19 for sensitivities).

Our provisioning forecast is VND7.7 tn (+26% YoY) for 2024E. In 2023, MBB cut provisioning by -24% YoY as it used provisioning to handle bad debts. We think that MBB will increase provisioning in 2024 back to the same range as in 2021 and 2022. Ceteris paribus, a 10% change in provisioning will cause a 2.4% change in net income in the opposite direction (see p. 20).

Reduced exposure to corporate bonds, which helps improve investors sentiment on the stock. MBB’s corporate bond/total assets declined to 4.1% from its peak of 7.5% in 3Q22. Specifically, MBB’s exposure to Novaland (NVL VN) was 0.9% of assets in 4Q23: Please see page 21 for sensitivities.

Our 2024E earnings forecast is VND26 tn (+24% YoY) for 2024E, which is far above the bank’s target of 10% growth in earnings largely due to our higher credit growth assumption.  

Yuanta versus the consensus. Our PATMI forecast is in line with the consensus mean for 2024E. However, our provisioning forecast might be higher than the street.

Valuation is still cheap. MBB trades at 1.1x 2024E P/B, which is in line with the sector median despite 2024E ROE of 23% vs. the sector median of 18%.

We raise our target price by +29% to VND32,480, implying a 1.5x 2024E P/B and a 12-month TSR of 32%. We reiterate our BUY recommendation.

Please see the link for more details: Bank Sector_CAMEL update_2024