BID_2Q21 results highlights

BID released 2Q21 PATMI of VND3.7 tn (+40% QoQ/+87% YoY) driven by higher net interest income, fee income, and strong NPL recoveries. 1H21 PATMI was VND6.4 tn (+87% YoY).

Details

Loans increased by 6.8% YTD (vs. the initial quota of 7.5% YoY). 2Q21 net interest income was VND12.7 tn (+17% QoQ/+83% YoY). 1H21 net interest income was VND23.5 tn (+46% YoY). Similar to other banks, the increase was largely due to lower cost of fund.

2Q21 net fee income was VND1.8 tn (+23% QoQ/+46% YoY). Other non-interest operating incomes were VND433 bn (-19% QoQ/-70% YoY). Other incomes (mostly loan loss recoveries) increased +20% QoQ/+76% YoY to reach VND2.2 tn.

Opex was nearly flat with VND4.1 tn (+1% QoQ/+3% YoY) as at 2Q21. 1H21 opex was VND8.1 tn (+9% YoY).

Provisioning was VND8.3 tn in 2Q21 (+15% QoQ/+91% YoY). In the 1H21, provisioning increased by 49% YoY to reach VND15.4 tn.

NPL ratio was 1.63% (-14bps QoQ/-37bps YoY) as at 2Q21, and the aggregate NPLs were VND21.1 tn (-3% QoQ/-7% YoY).

LLR ratio increased to 131% in 2Q21 (+24ppt QoQ/+51ppt YoY).

CASA ratio was 18.6% (+30bps QoQ/+2.8ppt YoY) as at 2Q21.

Our view

Earnings appeared strong, which was a bit surprise to us. Low funding cost and strong fee income growth were the key drivers to earnings in 2Q21. Also, NPL recoveries contributed significantly to earnings, and we think this will continue to be the key earnings drivers as BID cleared all VAMC exposure in the beginning of 2020.

Asset quality improves, with lower NPL ratio and higher loan loss reserve (LLR) ratio. We think that the increased provisioning is a prudent approach that has resulted in higher loan loss coverage.

However, we noticed that BID’s held-to-maturity securities increased significantly to VND28.2 tn (+116% YTD) as at 2Q21. We don’t have a breakdown on this item, but we suspect that it might relate to VAMC bonds. Though the details are unclear, but it might be worth to keep an eye on BID’s asset quality.

BID trades at 2.0x 2021E P/B vs. sector median of 1.9x. While 2021E adj. ROAE is only 12% in our estimate vs. the sector median of 20%. However, we might need to revisit our model.

For the complete report, please access here: BID_2Q21_Results

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