HDB_4Q20_Build up stronger buffer

TP upside (downside) -1%
Close 3 Feb 2021
Price                            VND 24,000
12M Target                VND 23,710
Our TP changed to reflect stock dividend paid in 2020.

Event

HDB held an analyst meeting on Feb 3. HDB’s 4Q20 PATMI was VND1.1 tn (-3% QoQ/-6% YoY), largely due to high provisioning expenses. In 2020, HDB’s PATMI was VND4.2 tn (+18% YoY), fulfilling 102% of our forecast.

Details

Credit growth increased by 23% YoY, mostly from SMEs (50.8% of total loans) and retail (37.8% of total loans). For 2021, the bank expects to achieve the same credit growth level as that of 2020, but this will be subject to the SBV quota.

4Q20 net interest income was VND3.2 tn (+6% QoQ/+11% YoY).

Annualized NIM was 4.68% in 4Q20 (-34bps QoQ/-91bps YoY). HDB expects 2021E NIM to remain at the same level of 2020.

4Q20 net fee income was VND321 bn (-2% QoQ but +100% YoY). Income from FX trading was up +206% QoQ/+70% YoY to reach VND93 bn in 4Q20. Income from trading/investment securities was VND79 bn (+629% QoQ/+89% YoY).

4Q20 Opex was VND1.9 tn (+20% QoQ/+37% YoY), which was one of the main reasons for the decline in earnings in 4Q20. The bank stated this was due to increased headcount.

4Q20 provisioning increased by +52% QoQ/+61% YoY to reach VND656 bn in 4Q20. In 2020, total provisioning was up +39% YoY to reach VND1.8 tn.

LLR ratio was 82% (+28ppt QoQ/+1ppt YoY) in 4Q20. The sequential rise in the LLR in 4Q20 was largely due to a large portion of its Cat. 3 NPLs reverting to performing loan status. Overall, its reported 4Q20 NPL ratio was 1.32% (-28bps QoQ/-3bps YoY).

Capital and liquidity remain strong. The bank’s total CAR (Basel II) was 12% vs the minimum requirement of 8.0%. Liquidity is solid as exhibited by its 24.8% short-term capital for medium to long-term loans ratio, which is well below the current regulatory cap of 40.0%.

Our view

Increased provisioning hurt earnings, but we think that is a prudent approach to prevent asset quality deterioration due to the Covid19 impact. This is in line with what we expected, as discussed in our 3Q20 results report.

The stock trades at 1.3x 2021E P/B, which is in line with the sector median of 1.3x, and reflects reasonable value given its superior operating results to the sector.

For the complete report, please access here: HDB_4Q20_Express note

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