MBB_Cheap valuation for high quality bank

BUY

TP upside (downside) +64%
Close 13 Apr 2020
Price               VND 15,750
12M Target        VND 25,900
Previous Target    VND 28,690
Change            -10%

What’s new?

• We slash our earnings forecasts by 11% for 2020E and 12% for 2021E.
• Loan growth revised down by 1ppt to 13.5% for 2020E.
• NIMs will be under pressure.
• We also cut our fee income forecast by 22% for the 2020E-21E.

Our view

• We reiterate our BUY rating despite this earnings downgrade.
• Quality is key in the current murky business environment. MBB is ranked 2^nd in our CAMEL rating framework.
• Attractive valuation for a high quality bank. MBB is now trading at 0.8x 2020E P/BV vs. 0.9x for peers.

Cheap valuation for high quality bank

Reducing our credit growth forecast. We lower our 2020E loan growth forecast for MBB by -1ppt to 13.5% YoY.

NIM forecasts cut by 28bps to 4.83% for 2020E. We expect MBB and its peers to follow the SBV’s policy in reducing lending rates to support enterprises during this difficult time. However, MBB’s status as Vietnam’s king of CASA should help limit the downside for its NIM.

We slash our fee income forecasts by 22% for 2020E-21E given the weak near-term outlook for transaction banking and the SBV’s order to cut settlement fees by at least 50% to support clients.

Rising provision costs and NPLs. Although MBB’s NPL ratio declined by 17bps to 1.16% in 2019, the net charge-off ratio jumped by 1ppt to 2.12% YoY, and provision costs surged by 61% YoY. Also, banks are rescheduling payments and retaining pre-outbreak asset quality categorization of related loans, which is likely to continue through 3Q20 at least. Thus, MBB’s provisioning will likely rise.

We slash our PATMI forecasts by -11% for 2020E and -12% for 2021E. We are now 5% below consensus for 2020E and 1% for 2020E. This still represents growth of +11% YoY in 2020E and +18% YoY in 20201E.

King of CASA. MBB has the highest CASA ratio in the sector at 38% in 2019 vs. the sector median of 14%. This is a competitive advantage that should be especially apparent in cushioning the NIM downside as banks to cut lending rates to support COVID-impacted borrowers.

Reiterate BUY— Valuation is attractive for a high quality bank like MBB. The stock’s 0.8 x 2020E P/BV is highly attractive vs. our (reduced) forecast of 19% ROE in 2020E. Even with the reduced target price of VND25,900, we still see 64% upside, and we maintain our BUY rating.

For the complete report, please access here: MBB_Company Update_14.04.2020

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