BID_3Q20 PATMI (+6% QoQ/+16%YoY)

SELL

TP upside (downside) -3%
Close 30 Oct 2020
Price                       VND 38,500
12M Target           VND 37,300

Event

BID reported 3Q20 PATMI of VND2.1 tn (+6% QoQ/+16% YoY) driven by net fee income and other noninterest income in 3Q20. In 9M20, BID’s PATMI was VND5.5 tn (flat YoY), fulfilling 56% of the bank’s full-year target and 66% of our forecast for 2020E.

Details

Loans increased by just 2.5% YTD, which is far below the sector’s credit growth rate of 6.1% YTD.

3Q20 net interest income was VND9.1 tn (+32% QoQ/+4% YoY).

NIM on total average assets was 2.51% in 3Q20 (+59bps QoQ/+3bps YoY), likely driven by lower funding costs.

3Q20 net fee income was VND1.4 tn (+13% QoQ/+30% YoY). Income from investment securities was +VND340 bn compared to a loss of -VND2 bn in 3Q19. Other income (which we believe is mostly loan loss recoveries) decreased by -19% QoQ/-17% YoY to reach VND1.0 tn.

Provisioning increased by +33% QoQ but was flat YoY to reach VND5.8 tn in 3Q20. Provisioning in 9M20 was down slightly (-2% YoY). The reported NPL ratio was 1.97% (-3bps QoQ/-12bps YoY) at 3Q20.

LLR ratio was 87% (+6ppt QoQ/+9ppt YoY) at 3Q20.

Our view

We expect credit growth to be recover in 4Q20 backed by the SBV easing policy and high capital demand at yearend.

BID’s current LLR ratio remains low and we expect that the bank to boost it in 4Q20 in light of asset quality deterioration that we think will become more transparent after Circular 01 expires.

Valuation is still high for this low-ROE bank, in our view. BID trades at 1.9x 2020E P/B vs. the sector median of 1.2x despite its low 2020E ROE of 11% compared to the sector’s median of 17%. BID benefits from its scale and SOE status, but we don’t see it as comparable to VCB (HOLD-Underperform) in terms of quality. We reiterate our SELL recommendation.

For the complete report, please access here: BID_3Q20_Express note

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