BID_AGM_Thirst for Capital

SELL

TP upside/(downside) -14%
Close 11 Mar 2021
Price                             VND 43,300
12M Target                 VND 37,300

BID held its annual general meeting (AGM) today (March 12) to discuss the bank’s 2020 results and set targets for 2021. The bank targets 2021E PBT growth of 44% YoY despite a low credit growth target of 10-12%. Capital rasing was also a key focus of the AGM.

Key Takeaways

Management targets to grow PBT by 44% YoY to reach VND13 tn in 2020E. This is despite a credit growth target of only 10-12%. The bank expects deposit growth to be 12-15% YoY.

The bank aims to control its NPL ratio at below 1.6% in 2021E.

Capital strengthening was the main focus. In 3Q21 and 4Q21, BID plans to issue 207.3 mn shares in the form of a 5.2% stock dividend for 2019 and 281.5 m shares as a 7.0% stock dividend for 2020. In addition, BID plans to issue another 341.5 million new shares in the 2021-2022E via public or private placement, equivalent to 8.5% of shares outstanding in 2020. Total charter capital after the raising, if successful, will be VND48,524 bn (+21% vs. 2020).

BID also might issue convertible bonds and ESOPs as additional options for capital raising, but the details are unclear.

We believe that increasing capital will be BID’s key focus in 2021. The bank didn’t raise any new capital in 2020, and its CAR ratio was about only 8% in 2020, which is the minimum required under Basel II. Thus, we believe that BID will focus on raising more capital to support its business growth in 2021.

However, we believe that additional capital call may prove to be difficult given BID’s current high valuation. BID is trading at 2.1x 2020E P/B while 2021E adjusted ROAE is only 12% on our estimates. This is expensive relative to the sector median P/B of 1.3x and median ROAE of 17%. As such, we reiterate our SELL recommendation.

For the complete report, please access here: BID_AGM Note_12.03.21

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