LPB – Growth momentum slow – Update

• In 3Q21, VRE posted VND787bn of revenue (-55.3% yoy; -47.8% qoq) and only VND24bn of net profit (-95.8% yoy, -93.7% qoq).
• Vincom Retail’s 9M21 revenue and net profit decrease 10.9%/15.3% yoy, fulfilling 55% of our FY21F earnings forecast.
• VRE is expected to launch a further support package of VND500bn and hand over about 90 shophouses in 4Q21 with a revenue of VND400bn.

3Q21 earnings grew modestly 3.8% yoy on soft credit growth, NIM compression and heavy provisioning.

9M21 NP grew 59.7% yoy to VND2,229bn mainly thanks to lower cost of funds (CoF), forming 80.2% of our-full year forecast.
Reiterate Hold rating with higher TP of VND25,700 following an 10.7% upward revision on FY21F earnings and a rollover to FY22F P/B.

3Q21 recap: Credit growth decelerated while NIM shrank

3Q21 net interest income (NII) rose only 11.9% yoy on 22.8% yoy credit growth and 28bp yoy net interest margin (NIM) compression. Annualised NIM was about 3.31% in 3Q21, even lower than that of 3.63% in 2Q21 as the bank lowered its lending rates to support pandemic-hit clients. Non-interest income (Non-NII) grew 22.1% yoy mainly driven by bad debt recovery (57.6% yoy). However, provision expenses surged 157.1% yoy as the bank ramped up provisioning. As a result, NP grew only 3.8% yoy to VND611bn, lower than that 38.2% yoy of 2Q21.

9M21 earnings ahead of our expectations

NII surged 33.8% yoy on the back of strong credit growth (+22.8% yoy, 10.7% ytd) and 32bp yoy NIM improvement. NIM expansion could be attributed to cost of fund (COF) drop by 62bp yoy as the bank cut its deposit rates from 0.61.6% yoy across all maturity spectrums, while assets yield eased only by 28bp. NIM improvement slew down in 2H21 as banks were strictly required to lower their lending rates to support for clients during the outbreak. Thus, we expect FY21 NIM of 3.32%, 16bp yoy. On expenses side, 9M21 CIR fell to 47.4% from 60.3% of 9M20 mainly due to lower staff cost. 9M21 net profit grew 59.7% yoy to VND2,229bn, fulfilling 80.2% our full-year forecast.

Asset quality has considerably improved

Non-performing loan (NPL) ratio dropped to 1.42% at end-3Q21 from 1.64% at end-3Q20 and 1.43% at end-4Q20 as the bank wrote off VND419bn bad debts. LPB also aggressively booked provisioning with 175.9% yoy in 3Q21, bringing loan loss reserve (LLR) up to 98.2% at end-3Q21 from 96.5% at end2Q21 and 89.6% at end-4Q20.

Reiterate Hold rating with a higher TP of VND25,700

We raise 1-year target TP to VND25,700 following an 10.7% upward revision on FY21 earnings and a rollover to FY22F P/B multiple. Our TP based on the equal weight of residual income valuation (COE: 14.6%; LTG: 3.0%) and a target P/B of 1.6x for FY22F book value. Upside risks to our TP are the success of the private placement for foreign investors and an upfront payment fee for exclusive bancassurance contract with higher-than-expected valuation. Downside risk is higher-than-expected credit cost.

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