ACB – Flat yoy earnings growth in 3Q21 – Earnings update

• 3Q21 net profit grew only 1.4% yoy on higher CIR and heavy provisioning
• 9M21 earnings surged 39.8% yoy to VND7,174bn, in line with our forecast

3Q21 recap: NIM started to shrink, provisioning hiked
• 3Q21 net interest income (NII) rose 24.4% yoy on 13.1% yoy loan book growth and 23bp yoy net interest margin (NIM) expansion. However, annualised NIM started to decline on qoq basis as the bank lowered lending rates to support pandemic-hit customers. Assets yield fell 58bp qoq to 7.2% while cost of fund was flat qoq, making annualised NIM to compressed 56bp qoq to 3.9% in 3Q21.
• Non-interest income (Non-II) grew 37.5% yoy on 29.3% yoy growth of net fee income (NFI) and 9.5x yoy increase of net gain from trading securities
• On the cost side, cost income ratio (CIR) climbed to 39.6% in 3Q21 from 38.6% in 3Q20 as staff costs jumped 79.9% yoy.
• The bank has aggressively booked provision in 3Q21 with 406,2% yoy increase, which made 3Q21 net profit grew only 1.4% yoy, lower than that of 70.1% in 2Q21.
9M21 results: NPL ratio slightly picked up

• Loan book expanded 8% ytd in 9M21, lower than that of 10.7% ytd in 9M20 as nationwide lockdown hindered the lending activities in 3Q21. We expect the bank will accelerate lending activities in 4Q21 and likely meet its credit growth quota of 13.5% by end-FY21. Meanwhile, 9M21 annualised NIM improved 68bp yoy to 4.2% mainly thanks to CASA ratio improvement to 22.5% at end-3Q21 from 19% at end-3Q20.

• 9M21 NII grew 39.2% yoy, while Non-II surged 23% yoy, making TOI to increase 35.7% yoy, fulfilling 72.3% of our FY21F forecast.

• CIR reduced to 33% in 9M21 from 45.2% in 9M20 as operating expense fell 0.8% yoy due to cost-cutting and reversal of provision for diminution in bad debt. Meanwhile, provision expense jumped 305% yoy in 9M21, but still lower than the growth rate of 328.6% in 9M20.

• 9M21 NP rose 39.8% yoy, better than the growth rate of 15.4% yoy in 9M20, completing 69.7% our full year forecast.

• Non-performing loan (NPL) ratio rose to 0.84% at end-3Q21 from 0.68% at end-2Q21. Restructured loan grew to VND13,416bn (~4% loan book at end-3Q21) from VND8,195 at end-2Q21. Until now, ACB provisioned fully of VND2,069bn to restructured loan rather than allocated them in 3-year framework. In 4Q21, ACB plans to book additional provision of VND500bn to restructured loan.

• Loan loss reserve (LLR) stayed stably at 197.7% at end-3Q21, slightly changed from the level of 207.7% at end-2Q21.

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