MBB – Earnings growth to slow in 2Q21 – Earnings update

• 2Q21 net profit growth slew down to only 14.7% yoy (much lower than the growth of 107.5% yoy in 1Q21).
• Overall, 1H21 net profit grew 54.7% yoy to VND6,149bn thanks to impressive credit growth and higher NIM, forming 54% of our full-year forecast.

2Q21 net profit grew 14.7% yoy on high provision

• 2Q21 net interest income (NII) and non-interest income grew 35.8% yoy and 41.9% yoy, respectively, lifting total operating income (TOI) by 35.8% yoy; lower than that of 45% as in 1Q21.

• We observed that the bank aggressively booked VND2,431bn (99.8% yoy) in 2Q21 provision, which is 34.4% higher than that of 1Q21. Consequently, loan loss reserves (LLR) climbed 236.5% at end – 2Q21, which is the highest rate in the bank’s history. Meanwhile, 1H21 non-performing loan ratio (NPL) saw a sharp decline to 0.75% at end-2Q21 from 1.27% at end-1Q21 and 1.16% at end-4Q20, which is the lowest record in the bank’s history.

• 2Q21 net profit grew 14.7% yoy to VND2,596bn.

1H21 performance recap: better funding cost to offset eroded asset yield

• 1H21 NII grew 34.3% yoy to VN12,515bn thanks to a 26.5% yoy rise in loan balance. MBB’s credit expanded 10.3% ytd in 1H21 vs. end-FY20, ranking second-highest in the mid and large cap banking sector. As the State Bank of Vietnam recently lifted MBB’s credit growth from 10.5% to 15% for FY21F, we believe the bank still have room for credit growth in 2H21F.\

• 1H21 assets yield softened 25bp yoy to 7.77% due to rate cuts to aid customers affected by the Covid-19 pandemic. Meanwhile, cost of funds (CoF) fell 85bp thanks to interest rates cut from 1-2% yoy across all maturity spectrums. As a result, 1H21 NIM increased by 50bp to 5.22%.

• 1H21 cost to income ratio (CIR) was 32.5%, lower than that of 34.7% in 1H20. 1H21 provision expenses increased by 28.1% yoy to VND4,240bn, brining credit cost to 2.7%, higher than 2.6% in 1H20.

Maintaining earnings growth forecast of 37.3% for FY21F 

• We expect NII to increase by 26.1% yoy on 17% yoy loan book rise and 35bp yoy NIM hike.

• We forecast 27% yoy growth in net fee income thanks to settlement income and strong insurance commission fee.
Together with a CIR of 37% and a credit cost of 2.2%, FY21F net profit is expected to grow 37.3% yoy to VND11,343bn.

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