VCB_2Q21 results highlights

VCB just released its 2Q21 financial statements. The earnings are lower than the preliminary results, please see below for details. 2Q21 PATMI was VND3.9 tn (-43% QoQ/-14% YoY) due to low fee income and high provisioning cost. 1H21 PATMI was VND10.9 tn (+24% YoY).

Details

Credit increased 9.8% YTD (vs. the initial quota of 10.5%) to reach VND922 tn, which is in line with the preliminary result. 2Q21 net interest income was VND11.1 tn (+10% QoQ/+37% YoY). 1H21 net interest income was VND21.2 tn (+24% YoY).

2Q21 fee income was only VND428 bn (-88% QoQ/-63% YoY). The details are not disclosed, but we think that the decline was partly because VCB did not recognize upfront fee from the exclusivity banca deal in 2Q21. 1H21 fee income was VND3.9 tn (+69% YoY).

2Q21 Opex was VND4.7 tn (-1% QoQ/+52% YoY). 1H21 Opex was VND9.5 tn (+18% YoY). The increase was due to higher administration activities cost of VND3.4 tn (+56% YoY) in 1H21. Recall that, VCB cut opex by reducing the administration cost by 22% YoY in 1H20.

2Q21 PPOP was VND8.2 tn (-25% QoQ/+7% YoY). 1H21 PPOP was VND19.1 tn (+27% YoY) versus the preliminary PPOP of VND19.6 tn.

Provisioning cost was VND3.2 tn (+42% QoQ/+74% YoY) in 2Q21. Total 1H21 provisioning was VND5.5 tn (+37% YoY).

2Q21 PBT was VND4.9 tn (-43% QoQ/-14% YoY). 1H21 PBT was VND13.6 tn (+24% YoY) versus the preliminary PBT of VND14.8 tn.

NPL ratio was down by -14bps QoQ and -9bps YoY to reach 0.74% as at 2Q21 versus the preliminary NPL ratio of 0.91%. LLR ratio increased to 352% (+73ppt QoQ/+97ppt YoY) versus the preliminary LLR ratio of 280%. VCB’s LLR ratio is still the highest in the sector.

CASA ratio was 33.2% as at 2Q21 (+10bps QoQ/+4.4ppt YoY).

Our view

Fee income decline was a drag to 2Q21 earnings. However, we believe that was a one-off event and fee income will continue to be higher in 2H21 driven by upfront fee recognition and bancassurance sales.

Asset quality remains solid with low NPL ratio, but watch out for rising NPLs. Particularly, cat. 2 NPLs increased 102% YTD to reach VND5.6 tn, and cat.4 NPLs jumped 239% YTD to reach VND757 bn. VCB’s high LLR ratio continues to reflect its prudent approach to credit risk.

Maintain BUY. The stock now trades at 3.2x 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_Results

Analyst: Tanh Tran, tanh.tran@yuanta.comvn