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VIB – Upward trajectory of earnings to extend in 3Q20 – Update

Company Note 06/11/2020    289


  • 9M20 NP grew 38.1% yoy to VND3,220bn, driven by 20.9% yoy loan book and 15 bp yoy NIM growth, fulfilling 91.3% of our previous FY20 forecasts.
  • We revise up FY20-22F EPS forecast by 7.4%-12.9% on higher loan growth and NIM expansion.
  • Reiterate ADD with higher TP of VND35,000.

Market price

Target price

Dividend yield



VND 32,800

VND 35,000




3Q20 credit leapfrog driven by individual lending

3Q20 net interest income grew 38% yoy to VND2,233bn due to 20.9% yoy loan growth and 52bp yoy rise in NIM. Loan book growth accelerated to 15.3% ytd at end-3Q20, more than double the growth of 6.7% ytd seen at end-2Q20. Individual lending widened 16.7% ytd at end-3Q20, vs 8.2% ytd at end-2Q20. 3Q20 non-interest income grew 35.5% yoy to VND798bn thanks to a 20.3% yoy growth in net fee income and a 111.9% yoy surge in income from bad debt collection. Cost-income ratio eased to 37.1% in 3Q20 from 41.4% in 3Q19, offsetting a 19.7% yoy increase in provision expense. Consequently, 3Q20 net profit (NP) jumped 52.4% yoy, extending the upward trajectory since 3Q19.

9M20 NIM expanded on lower funding cost

VIB enjoyed its highest annualised NIM of 4.1% in 3Q20, improving 15bp yoy on +5bp yoy asset yield (AY) and -10bp yoy cost of fund (COF). VIB’s upward trend of both AY and COF halted since 1Q20 under key rates cut but deposit rates fell faster than lending rates. 3Q20 AY fell 20bp which was offsetted by a 39bp plunge in COF, leading to 18bp higher NIM since 1Q20. Together with a loan growth of 15.3% ytd in 9M20, NII rose 30.8% yoy. Also, non-II rose 43.3% yoy while CIR improved to 40.3%, offsetting a 27.1% yoy surge in provision expense. Therefore NP rose 38.1% yoy in 9M20.

Bad debt is still considerable

Non-performing loan (NPL) ratio fell to 2.14% at end-3Q20 from 2.37% at end-2Q20 while loan loss reserve (LLR) slightly dropped to 48.3% at end-3Q20 from 49.8% at end-2Q20. VIB increased writing-off bad debt in 3Q20, which made the annualized write-off rate rise to 0.36% in 9M20 from 0.12% in 1H20, helping to improve NPL ratio.

We increase EPS forecast by 7.4%-12.9% in FY20-22F

We raise our FY20/21F loan growth forecast to 20%/24% vs.18%/23% previously to reflect the expansion in credit demand in the past two months. Our revised FY20-22F NIM rise by 11-18bp on lower funding cost driven by ongoing loosening monetary policy in FY21F. We revise CIR down to c.43% from 44% in FY20-22F. Hence, NP is expected to grow 21.9%/14.1%/15.6% in FY20/21/22F vs. our previous forecast of 7.9%/17.8%/17.7%.

Reiterate Add with higher TP of VND35,000

Our new TP is VND35,000 (+33.1%) on the FY20-22F earnings upgrade and a higher FY21F P/BV (1.3x from 1.1x) to reflect the stock’s migration to Ho Chi Minh Stock Exchange. VIB is officially listed on 10 Nov 20. Hence, market price of VND32,800 is VIB’s closing price of its last day transaction on UPCOM on 29 Oct 20. Our TP is based on residual income valuation (COE: 15%; LTG: 3.0%) and 1.3x FY21F P/BV, weighting equally. Upside catalysts are better-than-expected loan and NIM rise. Downside risk would be higher-than-expected bad debt.

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