VPB_Lower COF helped improve NIM
21/01/2021 - 15:57
HOLD – Underperform
TP upside (downside) -35%
Close 20 Jan 2021
Price VND 34,200
12M Target VND 22,346
* Our TP changed to reflect change in shares outstanding
VPB reported 4Q20 PATMI of VND2.9 tn (+29% QoQ/+16% YoY). The increase was largely to increased net interest income and lower operating cost. In 2020, VPB’s PATMI was VND10.4 tn (+26% YoY), fulfilling 128% of the bank’s target for 2020 and 147% of our forecast.
Credit growth (including corporate bonds) was VND323 tn (+19% YoY).
4Q20 net interest income was VND8.7 tn (+11% QoQ/+6% YoY), while
NIM on total average assets was 8.39% (+64bps QoQ/-57bps YoY).
4Q20 net fee income was VND1.0 tn (+10% QoQ/ +22% YoY). Other income (mostly recoveries) increased by +39% QoQ/+17% YoY to reach VND724 bn.
Adjusted cost to income (CIR) ratio decreased to 27.7% in 4Q20 (-3.4ppt QoQ/-6.3ppt YoY).
Provisioning jumped by +12% QoQ/+17% YoY to reach VND4.3 tn in 4Q20. In 2020, total provisioning increased slightly (+7% YoY) to reach VND14.6 tn. The NPL ratio (Cat. 3-5 NPLs) was 3.41% (-24bps QoQ/-1bps YoY).
LLR ratio was 45% (-3ppt QoQ/-1ppt YoY) in 4Q20. Despite the increase in provisioning in 4Q20, VPB’s reserve coverage continues to remain among the lowest figures in the industry.
Lower cost of fund (COF) helped improved NIM. Given the SBV’s easing monetary policy, banks’ funding cost has reduced and VPB is no exception. VPB’s COF decreased to 5.7% (-33bps QoQ/-45bps YoY) in our calculation. CASA ratio increased to 15.6% (flat QoQ/+2ppt YoY).
Capital levels remains strong… with total CAR (under Basel II) of slightly more than 11%, well above the minimum requirement of 8%.
…Continue to keep an eye on NPLs in 2021. Total NPLs were VND9.9 tn (+12.8% YoY) as at 4Q20. Of which, cat. 3 NPLs increased by 11% YoY & cat. 4 NPLs jumped by 39% YoY. We expect NPLs to jump in 2021 and VPB’s current low LLR ratio cause a concern. We believe VPB to further increase LLR ratio to prevent deterioration asset quality.
Reiterate HOLD-Underperform. Strong market liquidity driven by domestic investors and expectation on the FE Credit IPO have boosted the VPB’s stock price recently, in our view. However, the unsecured consumer business continues to remain key operational concern, and we remain HOLD-underperform recommendation. The stock trades at 1.4x 2021E P/B. Our target price implies -35% 12-month downside.
For the complete report, please access here: VPB_4Q20_Express note
Analyst: Tanh Tran, email@example.com