VIB – Sailing against headwinds – Update

• 3Q21 earnings dropped 17% yoy to VND1,108bn on lower bancassurance income and heavy expenses.
• 9M21 net profit grew +32.7% yoy, fulfilling only 66% of our forecasts.
• We maintain Add but lower TP to VND46,400 following a slight FY21-23F EPS downgrade.

A hiccup in 3Q21 performance

VIB’s 3Q21 net interest income (NII) rose 20% yoy on 25.6% yoy credit growth but subdued 46bp yoy NIM. 3Q21 non-interest income (non-II) decreased 49.6% yoy due to a 32.7% yoy drop in fee income, mainly derived from lackustre bancassurance business (-45.8% yoy). While 3Q21 operating revenue grew modestly 1.6% yoy, operating expenses surged 27% yoy, resulting in a higher CIR of 46.4% (vs. 37.1% of 3Q20, 35.4% of 2Q21). Provision expenses grew 12% yoy, bringing 3Q21 net profit dropped 17% yoy to VND1,108bn.

9M21 recap: bancassurance lost steam

9M21 NII grew robustly 41.8% yoy to VND8.4tr, while non-II edged up only 3.2% yoy due to the subdued bancassurance. 9M21 bancasurance income decreased 10.1% yoy due to movement restrictions during Covid-19. Credit expanded 10.8% ytd at end-3Q21 from 8.1% at-end 2Q21, lower than that of 14.2% ytd seen in 9M20. Though NIM slightly shrank in 3Q21 but still expanded 32bp yoy in 9M21 to 4.4%. Asset quality slightly deteriorated as NPL ratio headed up to 1.57% at end-3Q21 (vs 1.46% at end-FY20), thus LLR fell to 54.1% (2Q21: 63.8% & end-FY20: 58.2%). CAR inched up to 10.6% at end-3Q21 from 10.1% at end-FY20, while LDR remained healthily at 73.1% vs 78.1% at end-FY20.

We revise down our FY21-23F EPS forecast by 5-7%

We lower our FY21F earnings forecast to VND6,189bn (5% lower than our previous forecast), to reflect the lacklustre bancassurance performance. For FY22-23F, we raise our FY22/23F loan growth forecasts to 26%/23% vs. 25%/22% previously as we believe VIB is well-positioned to capture the increasing credit demand in the next 2 years. However, we trim FY22-23F NIM forecasts to 4.24%/4.21% from previous 4.45%/4.54% as the lending rates are expected to further drop in the future. Consequently, FY22-23F NP were 7.2%/7.3% lower than previous forecasts.

Reiterate Add with a lower TP of VND46,400

We adjust our 1-year target TP to VND46,400 following a FY21-23F earnings downgrade and a rollover to FY22F P/BV valuation. Our TP is based on the residual income valuation (COE: 14.3%; LTG: 3.0%) and 2.5x FY22F P/BV, weighted equally. Upside catalysts are higher-than-expected loan growth and lower CIR. Besides, downside risk would be higher-than-expected bad debt.

Please follow this link for the full report