VCB_2Q1_Preliminary Earnings Review

VCB’s 2Q21 preliminary PBT was reportedly about VND6.0 tn (-31% QoQ/+3% YoY). 1H21 PBT reached about VND14.8 tn (+35% YoY), fulfilling 58% of the bank’s full-year target and 48% of our forecast for 2021E.

Details

Credit increased 9.8% YTD (vs. the initial quota of 10.5%) to reach VND920 tn. Retail credit (+11.9% YTD) represented 54.8% of total loans as at 2Q21 vs. 53.5% at 2020. According to the media, VCB has asked for a higher credit growth quota of 14% and is waiting for SBV’s approval.

Customer deposit was about VND1,051 tn (+1.8% YTD).

The bank reported 1H21 PPOP of about VND19.6 tn (+30% YoY). Thus, 2Q21 PPOP was about VND8.6 tn (-21% QoQ/+14% YoY).

NPL ratio increased slightly by +3bps QoQ and 7bps YoY to reach 0.91% as at 2Q21. LLR ratio was 280% (+1ppt QoQ/+26ppt YoY), which is probably the second highest in the sector; VCB’s preliminary LLR ratio is lower than the 311% ratio reported by MBB.

Our view

We believe that high credit growth and high fee income were positive for PPOP, but high provisioning costs were a drag on earnings. We will provide further detailed analysis on VCB’s earnings once the bank has released its full financial statements.

VCB’s high loan loss coverage continues to reflect its prudent approach to credit risk. The high LLR ratio reflects VCB’s greater flexibility than most banks have to reduce provisioning and thus boost 2021E earnings without sacrificing asset quality.

Asset quality is solid with low NPL ratio but watch out for increasing NPLs.

Fee income continues to be higher driven by upfront bancassurance exclusivity fee recognition and bancassurance sales.

Maintain BUY. The stock now trades at 3.5x 2021E P/B vs. the sector median of 1.9x. We continue to view VCB as the highest quality bank in Vietnam, as demonstrated by its high LLR and low NPL ratios, and we believe VCB’s valuation premium to be merited.

For the complete report, please access here: VCB_2Q21_Preliminary Results

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