Home PageThe analysisSTB_4Q20_Earnings boosted by low provision

STB_4Q20_Earnings boosted by low provision

22/01/2021 - 11:28

TP upside (downside) -35%
Close 21 Jan 2021
Price                             VND 20,000
12M Target                 VND 12,950



STB reported 4Q20 PATMI of VND837 bn (+17% QoQ/+577% YoY). Earnings boost was largely driven by lower provision and increased non-interest incomes. In 2020, STB’s PATMI was VND2.7 tn (+9% YoY), fulfilling 113% of our forecast for 2020.


Loans increased by 15% YoY, completing 120% of our 2020 forecast.

4Q20 net interest income was VND3.0 tn (-1% QoQ but +70% YoY).

NIM on total average assets was 2.47% in 4Q20 (-5bps QoQ/+89bps YoY), which we attribute to slightly lower funding costs due to SBV easing.

4Q20 net fee income declined by -14% QoQ/ -10% YoY to reach VND1.1 tn. Income from FX trading increased +58% QoQ/+35% YoY, and from investments soared by +20x QoQ/+514% YoY. Other income (mostly loan loss recoveries) jumped by +63% QoQ/+1% YoY.

Provisioning was only VND64 bn in 4Q20 (-95% QoQ/-86% YoY), which was the primary driver of increased bottom line in 4Q20. However, total provisioning was up +35% YoY to reach VND2.9 tn in 2020.

LLR ratio jumped to 94% (+20ppt QoQ/+24ppt YoY) in 4Q20.

The reported NPL ratio was 1.70% (-2bps QoQ/+14bps YoY). Total legacy net non-performing assets (NPAs) were VND65 tn (-8.8% QoQ/ -14.3% YoY). As such, we estimate that STB’s total NPA ratio decreased to 13.1% of total assets as at 4Q20 (-1.5ppt QoQ/ -3.5ppt YoY). For the year as a whole, STB resolved VND15 tn of NPAs on its balance sheet, completing 136% of the bank’s full-year target.

Our view

The legacy NPA resolution story continues to play out. STB’s NPA ratio has declined substantially from the peak of 27.2% in 4Q17 to 13.1% as at 4Q20 on a combination of asset sales/recoveries and provisioning.

But reduced provision as an earnings driver fails to impress. 4Q20 earnings were largely driven by reduced provisioning. Management deserves credit for reducing the legacy bad assets by half in percentage terms in the past three years, but the cleanup task is not over yet and may be compounded by COVID.

STB trades at 1.2x 2021E P/B vs. the sector median of 1.4x which is arguably a stretch given the substantial nonperforming assets that still remain to be resolved and the bank’s relatively low 2021E ROE of 8.8%. Our recommendation is under review.

For the complete report, please access here: STB_4Q20_Express note

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