VIB – Robust 1Q21 earnings growth – Earnings Update

• 1Q21 net profit rose 68.1% yoy to VND1,446bn on a 54.4% yoy net interest income growth and a 48.1% yoy net fee income rise, in line with our forecast.
• Loan book expanded 31.6% yoy (+4.7% ytd) at end-1Q21, driven by a 38.4% yoy (+7.5% ytd) retail lending increase.

1Q21 NP skyrocketed on topline hike and CIR amelioration

• Net interest income (NII) increased 54.4% yoy to VND2,778bn, following 31.6% yoy growth of loan book and a 61bp yoy increase of NIM.
• Annualised NIM inched up to 4.5% as a 149bp yoy decline in cost of fund on key policy rates cuts offset a 79bp yoy drop in assets yield. Assets yield recorded a less compressed rate due to the bank’s effectiveness in expanding on retail lending which was up to 85% loan book at end-1Q21 from 81% at end-1Q20.
• Net fee income (NFI) surged 48.1% yoy to VND609bn in 1Q21, driven by a 52.4% yoy rise in settlement income (contributed 29% to NFI) and a 27% yoy increase in commission fee income (accounted for 44% NFI).
• Cost income ratio (CIR) subdued to 38.9% in 1Q21 following the downward path from the levels of 45.5%, 39.5%, 37.1%, and 38.7% seen in the past 4 quarters,
  thanks to VIB’s operational efficiency.
• The bank took the opportunity to aggressively increase provisioning expense 114.3% yoy, improving asset quality in 1Q21.
• Consequently, 1Q21 net profit rose 68.1 yoy, fulfilling 24.4% our FY21 forecast.

Asset quality has considerably improved

• The bank aggressively wrote off bad debt in 1Q21, bringing its non-performing loan (NPL) ratio to 1.7%, same level seen at end-FY20 but heavily down from 2.2% at end-1Q20. Particularly, the annualised write-off rate was up to 0.42% in 1Q21 from 0.05% in 1Q20, and significantly higher than FY20 write-off rate of 0.32%.
• Robust provision also lifted loan loss reserve (LLR) to 62% at end-1Q21 from 58.2% at end-2020 and 47.3% at end-1Q20.

Maintaining earnings growth forecast of 27.6% for FY21F

• We expect NII to increase 31.8% yoy on a 26% yoy loan book rise and a 10bp yoy NIM hike.
• We forecast a 22% yoy growth in NFI which is given by commission fee and settlement incomes makes up 89% Non-II vs. the rates of 88%/93% in FY20/19.
• Together with a CIR of 40% and a credit cost of 0.67%, FY21F net profit is estimated to grow 27.6% yoy to VND5,920bn.

Please follow this link for the full report