Banks: Sector headwinds likely priced in – Update

• A drop in banks’ net profit growth is expected in FY20F as Covid-19 leads to low credit demand, NIM compression and a likely increase in bad debts.
• We expect banks under our coverage to show earnings recovery in FY21F in the base case scenario that the pandemic ends in mid-FY20F.
• Our top picks are VCB, ACB and MBB, thanks to their prudent asset management, lower risk appetite and better recovery outlook.

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