MBB_3Q20_Higher NIM & Lower provisions

BUY

TP upside (downside) +28%
Close 15 Oct 2020
Price                       VND 17,600
12M Target           VND 22,500

 * Our TP changed to reflect the 15% stock dividend paid in Sep 2020.  

Event

MBB reported 3Q20 PATMI of VND2.4 tn (+1% QoQ/+10% YoY) driven by lower provisioning and higher net interest income in 3Q20. In 9M20, MBB’s PATMI was VND6.3 tn (+6% YoY), fulfilling 90% of the bank’s full-year target and 73% of our forecast for 2020E.

Details

Loans increased by 7% YTD, completing 52% of our 2020E forecast.

3Q20 net interest income was VND5.2 tn (+12% QoQ/+13% YoY).

NIM on total average assets was 4.87% in 3Q20 (+40bps QoQ/+28bps YoY), which we attribute to slightly lower funding costs due to MBB’s strong CASA deposit franchise and the SBV’s easing policy.

3Q20 net fee income was VND796 bn (-16% QoQ but +59% YoY). Other income (mostly loan loss recoveries) decreased by -21% QoQ/-53% YoY to reach VND425 bn.

Provisioning declined by -27% QoQ/-33% YoY to reach VND884 bn in 3Q20, which helped to boost earnings. However, total provisioning was still up +14% YoY in 9M20. The reported NPL ratio was 1.50% (+13bps QoQ/+2bps YoY).

LLR ratio: 119% (-2ppt QoQ/+16ppt YoY) in 3Q20. This is among the highest reserve coverage figures in the industry.

CASA deposits rebounded. CASA deposits were VND102 tn (+11% QoQ/+19% YoY). MBB’s CASA ratio was 37.7% in 3Q20 (+2ppt vs. 2Q20), which we believe is still the highest of all the banks.

Our view

Earnings remain positive, as we suggested they would in our 3Q20 earnings preview. The high LLR ratio gives MBB the flexibility to reduce provisioning and boost earnings, as it clearly did in 3Q20. We believe that MBB is under relatively low pressure to increase provisioning in 4Q20, in contrast with many other banks.

Strong CASA deposits helped reduce funding costs, which boosted net interest income in 3Q20. We expect MBB’s CASA ratio to rise even higher in 4Q20. As a reminder, MBB reported increases in its CASA deposit ratio in both 4Q18 and 4Q19.

Asset quality remains solid but keep an eye on rising NPLs. 3Q20 NPLs ratio of 1.50% is under control, but Category 5 NPLs (i.e., loss) increased by +17% QoQ/+47% YoY.

Reiterate BUY. MBB trades at 1.1x 2020E P/B vs. the sector median of 1.3x despite its superior operational quality to most of its peers. Our target price implies +28% 12-month total shareholder returns.

For the complete report, please access here: MBB_3Q20_Express note

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