SHB_Analyst Meeting: Improved asset quality

Not Rated

TP upside (downside): N/A
Close 29 Jan 2021
Price                            VND 14,600
12M Target                N/A

Event

SHB held an analyst meeting on Jan 29 to discuss its 2020 results and 2021 outlook.

Details

Credit growth target of 14% for 2021E (subject to SBV quota). SHB’s long-term strategy is to focus on retail and SMEs. Credit increased 19% YoY to reach VND 307bn in 2020

SHB targets to achieve NIM of 3.20% in 2021E. This would be 40bps higher than its 2020 NIM of 2.80% (+42bps QoQ/+50bps YoY).

4Q20 provisioning soared to reach VND2.6tn (+147% QoQ/+97% YoY). That brought Full-year provisioning to VND4.5tn (+88% YoY) in 2020.

4Q20 PATMI was VND642 bn (-15% QoQ/+5% YoY). In total, 2020 PATMI was VND2.7 tn (+13% YoY).

SHB targets ambitious PBT growth of 70.8% in 2021E.

The bank’s NPL ratio decreased from 2.47% in 3Q20 to 1.72% at 4Q20 (-75 bps QoQ/-11bps YoY).

SHB’s LLR ratio was 69% (+12ppt YoY/+5ppt YoY) in 4Q20, which is slightly below the sector median. However, management indicated confidence in their reserve levels due to collateral coverage.

CASA deposits are relatively low but improving. SHB’s CASA ratio was 9.7% (+2.0ppt QoQ/+2.9ppt YoY) as at 4Q20, below the probable sector median in 4Q20. SHB plans about USD100mn in IT spending in the next five years, which it believes will help to improve CASA.

The bank’s reported CAR is 10.0% as at 4Q20, and it targets to maintain CAR at about 9.5% (Basel II definition).

Our view

Asset quality has improved. SHB increased its provisioning in 4Q20 to boost its LLR ratio. Although this hurt earnings, we view it positively because increased LLR is necessary to provide a buffer against asset quality deterioration. This result is in line with what management indicated during our December company visit.

We don’t cover SHB and have no recommendation on the stock. SHB trades at 1.1x 2021E P/B, which is below the sector median of 1.3x. SHB plans to move its listing from the HNX to the HSX, and we expect this to occur in 1Q21. This transfer to the more liquid exchange could continue to be a short-term catalyst for SHB’s stock price.

For the complete report, please access here: SHB_Analyst Meeting_Jan.2021

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