MBB_3Q19: Watch CASA and NPL

Action: 

BUY

TP upside (downside) +25%

Price (23 Oct)         VND 22,900

12M Target (*)        VND 28,694

Previous TP           VND 29,880

Change                -4%

Event

• Positives: 3Q19 PBT was VND2.7 tn (+12% QoQ and +25% YoY).
• PBT for 9M19 (+27% YoY) was 76% of our full-year forecast.
• Negatives: 3Q19 NPL ratio of 1.54% was up 21bps vs. 2018A.
• Negative CASA growth of 13% YTD caused a concern

Our Take

Retail loans continue to dominate. MBB posted credit growth of 11.9% YTD, of which retail and private companies’ loans account for 89% of the loan book. The Bank reported 3Q19 net interest income (NII) of VND4.6 tn (+4% QoQ / +26% YoY) and 9M19 NII of VND13.1 tn (+26% YoY). 9M19 NIM was 3.73%, which was up 40bps compared to the same period last year.

…But watch CASA. CASA deposits declined by 13% YTD, which could be a potential concern given that the superior funding franchise is one of MBB’s key attractions. As at 3Q19, MBB’s CASA ratio was 33%, down 7ppt vs. 2018A.

3Q19 fee income was VND499 bn (-53% QoQ / -30% YoY), but 9M19 was VND2.3 tn (+37% YoY). Bancassurance net income was VND1.3 tn (+46% YoY) and contributed 54% to the total YTD fees. This was slightly down from banca’s 59% fee contribution in 2018A. But we remain bullish on this segment given that the comparisons are skewed by one-off upfront fees last year.

3Q19 PBT was VND2.7 tn (+12% QoQ / +25% YoY) and 9M19 was VND7.6 tn (+27% YoY). This completed 80% of the bank’s full-year target, 76% of our 2019E forecast, and 76% of Bloomberg consensus PBT.

Asset quality remains solid but keep an eye on rising NPLs. MBB’s NPL ratio was 1.54% as at 3Q19, 21bps higher than that of 2018A. Category 5 NPLs (i.e., loss) were up 40% YTD in the first three quarters of 2019.

Our view: The lower CASA numbers and higher NPLs are our key concerns from these results. However, the potential sale of another 7.5% of FOL-eligible capital and the inclusion in the VN-Diamond Index (i.e., the Vietnam-FOL Index with a benchmarked ETF to be launched as early as 4Q19) could provide strong catalysts for MBB’s stock price performance in 4Q19. We reiterate our BUY recommendation on MBB – King of CASA.

For the complete report, please access here: MBB_3Q19 Update_10.2019

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