CAMEL_2Q22_Update

ACB, VCB, and MBB continue to rank in the top 3 on our 2Q22 CAMEL score rankings. Asset quality of these three banks remains strong, as demonstrated by low NPL ratios and high LLR ratios. Notably, VCB increased its LLR ratio to a record high of 506% in 2Q22 (+133ppt QoQ/+154 ppt YoY), which is the highest in the sector. These banks also posted impressive earnings growth with MBB (2Q PATMI +78% YoY) followed by ACB (+52% YoY), and VCB (+50% YoY).

Sector aggregate PATMI was VND51 tn (-7% QoQ/+37% YoY) in 2Q22, nearly exactly in line with our forecast of -9% QoQ/+36% YoY. The sequential decrease was 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. The YoY growth was driven by operational momentum, including increased net interest income and net fees, as well as reduced provisioning.

Sector net interest income jumped by +8% QoQ/+16% YoY to reach VND106 tn. Loans to customers for the 27 listed banks grew by 10.2% YTD in 2Q22. Sector NIM on average total assets was 3.64% (+12bps QoQ/-8bps YoY) in 2Q22. Going forward, we expect NIM to be constrained by 1) rising funding costs and 2) the reduced cap on ST funding to MLT loans starting from October.

Net fee income increased by +4% QoQ/+10% YoY to reach 16 tn.

Total provisioning was VND29 tn (+15% QoQ/-14% YoY) across the listed banks, which also boosted the YoY earnings growth in 2Q22.

We remain Overweight the banks. In our view, valuations are attractive at the current aggregate level of 1.3x 2022E P/B with 2022E ROE of 21% (source: Bloomberg Consensus). Our top picks are MBB (BUY), ACB (BUY), and VCB (BUY), underlining our preference for quality. We also have BUY recommendation on STB (BUY) and VPB (BUY)

For the complete report, please access here: Banks_CAMEL_2Q22_Updated

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