MBB_4Q20_Further increased provision

BUY

TP upside (downside) -14%
Close 21 Jan 2021
Price                            VND 25,800
12M Target                VND 22,300

* Our TP changed to reflect change in shares outstanding.

Event

MBB reported 4Q20 PBT of 2.6VND tn (-15% QoQ/+6% YoY) largely caused by significant jump in provision. In 2020, MBB’s PBT was VND10.7 tn (+7% YoY), fulfilling 99% of our forecast for 2020E.

Details

Loans increased by 19% YoY, completing 105% of our 2020 forecast.

4Q20 net interest income was VND5.8 tn (+12% QoQ/+19% YoY).

NIM on total average assets was 5.03% in 4Q20 (+16bps QoQ/+19bps YoY), which we attribute to slightly lower funding costs due to MBB’s increased CASA ratio in 4Q20 and the SBV’s easing policy.

4Q20 net fee income was VND1.1 tn (+37% QoQ/+25% YoY). Other income (mostly loan loss recoveries) was VND475 bn (+12% QoQ/-9% YoY).

Provisioning jumped by +118% QoQ/+59% YoY to reach VND1.9 tn in 4Q20, which dented earnings. Total provisioning was VND6.1 tn (+25% YoY) in 2020. The reported NPL ratio declined to 1.09% (-28bps QoQ/-6bps YoY).

LLR ratio increased to 134% (+13ppt QoQ/+21ppt YoY) in 4Q20. This is among the highest reserve coverage ratio in the sector.

CASA deposits continued to rebound. CASA deposits were VND127 tn (+25% QoQ/+22% YoY). We believe that MBB’s CASA ratio is still the highest in the sector, with 40.9% in 4Q20 (+3ppt vs. 3Q20).

Our view

Increased provision hurt earnings but necessary. Though higher provision dented earnings, it helped to prevent asset quality deterioration due to the impact of the Covid19, which we believe that is a prudent approach. The high LLR ratio gives MBB the flexibility to reduce provisioning and boost earnings in the upcoming time.

Strong CASA deposits as we expected in the previous 3Q results report. Increased CASA helped reduce funding costs, which boosted net interest income in 4Q20.

Strong asset quality, but keep an eye on rising NPLs in 2021, probably in 1Q21 and 2Q21.

MBB trades at 1.3x 2021E P/B vs. the sector median of 1.4x despite its superior operational quality to most of its peers. We believe that MBB deserves a premium over its peers. Our model is under review to reflect reduced discount rate.

For the complete report, please access here: MBB_4Q20_Express note

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