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ACB – Encouraging 1Q21 results – Earnings Update

Company Note 28/04/2021    301

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  • ACB posted loan book growth of 4.1% ytd in 1Q21, higher than the rates of 2.3%/3% ytd in 1Q20/1Q19.
  • 1Q21 net profit rose 61.6% yoy to VND2,483bn, driven by solid topline hike and CIR improvement, in line with our forecast.
  • Reiterate Add with an unchanged TP of VND39,500.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND34,000

VND39,500

0.00%

ADD

FINANCIALS

1Q21 earnings leapfrog on topline hike

  • Net interest income (NII) grew 35.7% yoy-the highest growth rate in last 17 quarters, to VND4,640bn, on a 18% yoy loan book rise and 61bp yoy NIM expansion.
  • Together with a 68.7% yoy skyrocket in net fee income (NFI) to VND625bn, total operating income (TOI) grew 29.6% yoy to VND5,675bn.
    CIR fell to 34.6% (or 41% if excluding the extraordinary reversal in operating expense), lower than 53.9% seen in 1Q20, on cost control effectiveness.
  • However, ACB’s provisioning significantly rose 6.5x yoy, helping asset quality continually safe and sound with NPL ratio of 0.9% and LLR of 120.4% at end-1Q21.
  • Consequently, net profit jumped 61.6% yoy to VND2,483bn in 1Q21, completing 28.4% our full year forecast.

Solid NII growth on expansionary loan book and NIM

  • Gross loan grew 18% yoy at end-1Q21, the highest level in the last 10 quarters, also in line with the GDP improvement to 4.48% yoy in 1Q21 vs. the rate of 3.68% yoy in 1Q20. ACB proved its competency in expanding credit under the economic recovery.
  • 1Q20 annualised NIM reached 4.3% (+61bp yoy) as a 137bp yoy decline in cost of fund (COF) offset a 76bp yoy assets yield drop. Lower COF was driven by key policy rates cuts and a CASA ratio expanded to 21.4% at end-1Q21 (vs. 21%/15.9% at end-FY20/1Q20). Meanwhile, less compressed assets yield was steered by ACB’s improved LDR to 83% at end-1Q21 from 78.5%/79.1% at end-FY20/1Q20.

We maintain our forecast for ACB’s NP growth of 14% in FY21F

  • We anticipate NII to grow 15% yoy on a 12% yoy loan book growth and 3bp NIM expansion.
  • NFI to rise 54.2% yoy, contribute 48% to non-II from the rates of over 47% in last 2 years, driven by commission fee income stream and a facet of upfront fee payment.
  • We expect the full year CIR of 47% while provision expense will account for c.7% the bank’s pre-provision operating profit (the rates were 8.9%/3.5% in FY20/FY19)
  • Net profit is estimated to rise 14% yoy in FY21F with continuously solid asset quality.

Reiterate Add with an unchanged TP of VND39,500

  • We reiterate our Add rating for ACB. Our TP is based on residual income valuation (COE: 14%, LTG: 3%), and 2x FY21F P/BV, weighted equally.
  • Upside catalysts are higher-than-expected loan growth and NIM expansion. Downside risk is higher-than-expected bad debt.

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