MBB – A good start to the year – Earnings update

• 1Q21 net profit grew 20.3% yoy to VND4,546bn following strong loan growth and higher NIM, forming 28% of our full year forecast..
• MBB will likely acquire a struggling institution that is subjected to special supervision by State bank of Vietnam (SBV).

MBB 1Q22 net profit in line with our forecast
● 1Q21 net interest income (NII) increased 41% yoy following 28.3 % yoy loan growth and 55bp yoy NIM expansion. Loan balance grew 14.3% ytd, much higher than the sector growth of 5.03%. Strong loan growth of MBB in 1Q22 was largely driven by 18.6% ytd of retail, accounting for 47.9% of loan mix.
● 1Q22 NIM expanded 55bp yoy to 5.6% as asset yield inched up 15bps yoy while cost of fund (COF) subdued 46bps yoy. Though higher than that of 4Q21, MBB’s deposit rates in 1Q22 were about 10-50bps lower than 1Q21.
● Non-interest income (Non-II) stayed flat, thus total operating income (TOI) grew only 27% yoy.
● 1Q22 provisioning expense increased 17.5% yoy to VND2,126bn, bringing the ratio of provisioning/pre-provision operating profit (PPOP) down 26.5% from 28.3% in 1Q21. Consequently, 1Q22 net profit surged 20.3% yoy to VND4,546bn, forming 28% of our full year forecast.
● At end-1Q22, non-performing loan ratio (NPL) was 0.98% (vs. 0.88% in 4Q21), loan loss reserves (LLR) was 250%, down from 268% in 4Q21.

MBB will likely acquire a struggling institution
Following the government-approved roadmap, MBB will acquire, at zero-cost, one of the institutions that are subjected under special supervision by SBV. According to management, this institution must meet some financial criteria for restructuring, including: its total asset value or book value is not greater than 10% of MBB; its registered charter capital is less than VND5,000bn, and its accumulated loss is less than VND20,000bn. MBB is likely to be awarded a greater credit limit and enjoy 0%-interest-rate loan package provided by SBV to solve a part of accumulated loss. The financial statement of this institution will not be consolidated into MBB during restructuring phase. MBB targets to cover the loss of this institution within the next 7-8 years. After restructuring, MBB is allowed to merge this institution or transfer for potential investors or offer to public (IPO).

We expect FY22F pre-tax profit to grow 28.5% yoy
We expect NII to increase 19.9% yoy on the back of 20% yoy credit growth. Together with a CIR of 35% and a credit cost of 1.9%, FY22F pre-tax profit is expected to grow 28.5% yoy to VND20.9tr, higher than MBB’s plan (23% yoy ~ VND20.3tr).

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