瑞信-亚太地区-银行业-越南银行业：融资以推动重新评级？-2019.5.7-25页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.7 May 2019Asia Pacific/VietnamEquity ResearchBanks Vietnam Banks Sector SECTOR REVIEWResearch AnalystsRikin Shah65 6212 3098rikin.shahcredit-Farhan Rizvi,CFA65 6212 3036farhan.rizvicredit-Capital raising to drive re-rating?Figure 1:MBB should deliver the strongest PBT growth in 2019E19822116140510152025MBBACBVPBCSeConsensusCompany guidance2019E PBT growth(%)Source:Company data,Credit Suisse estimatesThe good and the bad.MBB delivered the best set of 1Q19 results,while they were weak at VPB and in line at ACB.In terms of overall trends observed,key positives are:(1)strong loan growth;(2)continued asset yield expansion;(3)strong fee income;and(4)stable asset quality.Key negatives:(1)margin contraction due to higher funding cost QoQ;(2)a decline in CASA deposits QoQ;and(3)weak bad debt recoveries.Capital raising to be the focus in 2019.Loans grew strongly(4.6%QoQ)in 1Q19,but would be capped by the credit quota of 13%for 2019(likely to be increased in 2H19).After margin expansion of 200 bp in the past five years,we expect NIMs to stabilise as increase in funding costs offset mix-shift-led asset yield gains.The cost of funds went up 30 bp QoQ due to a fall in CASA deposits and increase in deposit rates(up 10-30 bp),as banks lock in longer tenure funds to meet regulatory requirements.Fee income growth remains robust(+59%YoY)and asset quality was resilient despite seasonality in 1Q.With Basel II implementation on the horizon(from Jan-20),both MBB and VPB are looking to make 10%private placements in 2H19 and to open the remaining foreign room available(10%and 7%,respectively).This should be a key catalyst for the stock price,in our view.MBB remains our top pick.Following 1Q19 results,we revise our 2019-21E earnings for MBB(up 2-3%),VPB(down 2-8%)and ACB(0%to+3%).Our new TPs are based on the revised ROAs.MBB remains our top pick on good operational performance with stable margins,strong fee income growth and benign asset quality.Its subsidiaries PBT is also expected to almost double this year and contribute 15%of group PBT.While we expect high-single digit earnings cut at VPB,we maintain OUTPERFORM as the stock remains undervalued relative to the peers(P/B of 1.1x vs.1.6x)despite of superior profitability(ROA of 2.2%vs.1.7%).Sector valuations are broadly fair,with both P/B and P/E close to historical averages.7 May 2019Vietnam Banks Sector2Focus charts and tableFigure 2:NIM contracted 20 bp QoQ mainly due to increased funding costsFigure 3:Fee income growth strong in 1Q19;banks confident of growing fee income at a 25-30%CAGR3.43.43.73.94.14.44.34.64.54.74.65.04.73.33.43.23.63.43.33.43.63.43.43.53.83.67.27.68.29.39.38.89.49.49.19.79.09.39.24.64.74.85.55.55.45.65.85.65.85.55.95.72.03.04.05.06.07.08.09.010.011.01Q163Q161Q173Q171Q183Q181Q19MBBACBVPBAggregate3520381272667141580020406080100120140160MBBACBVPB Parent14-17 cagr2018 YoY1Q19 YoYSource:Company data,Credit Suisse estimatesSource:Company data,Credit Suisse estimatesFigure 4:Total loans at risk ratio increased only 20 bp QoQ,despite usual 1Q seasonal deterioration Figure 5:TCB and VPB are the best capitalised under Basel II3.97.66.97.77.35.65.24.65.74.80.01.02.03.04.05.06.07.08.09.011121314151617181Q181Q19Total loans at risk ratio(%)14.312.811.911.09.410.812.010.111.19.5n.an.a0246810121416TCBACBVPBMBBSOCBsJSCBsBasel IBasel IIBasel II limit from 2020As of 2018Note:Aggregated for MBB,ACB and VPB.Source:Company data,Credit Suisse estimatesSource:Company data,Credit Suisse estimatesFigure 6:Target prices are based on Gordon growth model,revised on the basis of new ROAs/ROEsROA(%)ROE(%)NormalisedTargetTargetTarget Current UpsideOldRating19E20E21E19E20E21EROA GearingROEP/BP/EPricePrice%TPNewOldMBB1.871.851.8420.419.418.71.8510.018.51.749.231,10021,5004530,568OOACB1.541.431.3922.719.417.71.4510.014.51.517.431,90029,400931,000NNVPB2.212.262.1519.618.416.52.218.017.71.609.027,50018,4504929,400OOSource:Company data,Credit Suisse estimates7 May 2019Vietnam Banks Sector3The good and the badMBB delivered the best set of 1Q19 results(link),while they were weak at VPB(link)and in line at ACB.PPOP grew only 6%YoY on lower bad debt recoveries(included under non-interest income)and higher provisions(19%YoY)led to a 1%decline in net profit.Figure 7:Aggregate PPOP grew 25%YoY in 3Q18(and 36%YoY in 9M18)MBBACBVPBAggregate(1Q19,%)QoQYoYQoQYoYQoQYoYQoQYoYNet interest income026-320417120 Net fee income-13141-1252245-259Non-interest income-1640-48-32-52-36-41-15Total revenue-529-166-114-1011Operating expense-3627-217526-1821Pre prov.Op.profit3530-104-19-5-46Provisions2939-106-112521219PBT3826615-42-32-8-2Net profit3925019-42-32-9-1Source:Company data,Credit Suisse researchKey positives:(1)strong loan growth;(2)continued asset yield expansion;(3)strong fee income;and(4)stable asset quality.Key negatives:(1)margin contraction due to higher funding cost QoQ;(2)a decline in CASA deposits QoQ;and(3)weak bad debt recoveries.Figure 8:Summary of key ratiosMBBACBVPBAggregate(%)1Q184Q181Q191Q184Q181Q191Q184Q181Q191Q184Q181Q19Balance sheet gr.(YoY)Asset growth26.515.421.119.215.812.023.716.413.323.115.915.6Loan growth28.016.618.319.316.112.124.621.522.123.718.017.3Deposit growth24.59.06.716.711.96.510.527.931.417.914.412.3Operating ratios Loan-to-deposit ratio858995828586132130123959899CASA ratio42.240.633.916.217.516.912.413.79.724.724.720.8Asset yield7.78.18.28.18.78.315.215.115.510.210.410.5Funding cost3.43.33.84.85.04.86.66.26.64.84.75.0Net interest margin4.55.04.73.43.83.69.19.39.25.65.95.7Non-II/revenue22.227.524.228.129.418.224.027.414.824.427.918.5Cost-to-income ratio39.156.339.250.956.051.531.031.737.437.644.540.9Asset quality metrics NPL ratio1.41.31.40.70.70.74.13.53.62.01.81.9SML ratio1.81.71.90.30.20.37.85.35.83.22.42.6Net VAMC ratio0.00.00.00.00.00.01.61.10.80.50.40.3Total loans at risk3.23.03.31.00.91.013.59.810.35.74.64.8Credit cost(bp of loans)1471421742648-3570580565240252243NPL coverage9111296135152158444648667674Loans at risk coverage41494294122111141617243129LLR/loan1.31.51.40.91.11.11.81.61.71.31.41.4Profitability ROA1.931.562.001.571.511.642.983.361.762.142.111.81ROE21.117.222.227.624.025.227.331.216.025.024.220.5Capital ratios Tier 1 ration.an.an.a8.710.6n.a12.910.8n.a Total CAR11.211.0n.a11.212.8n.a15.211.9n.a Source:Company data,Credit Suisse researchOperational performance was the strongest at MBB7 May 2019Vietnam Banks Sector4Margins contracted sequentially at both MBB(higher funding cost)and ACB(lower asset yield),and were flattish at VPB as the increase in funding cost was offset by a higher asset yield.Overall,we saw funding costs inching up in the quarter due to a decline in the CASA ratio and higher interest rates offered on deposits,in line with our expectation(2019 outlook report).Asset quality remained benign,with the total loans at risk ratio increasing only 20 bp QoQ to 4.8%despite the usual seasonal deterioration in 1Q.Figure 9:NIM contracted 20 bp QoQ mainly due to a 30 bp increase in funding costsFigure 10:Total loans at risk ratio increased only 20 bp QoQ,despite usual 1Q seasonal deterioration 3.33.94.23.73.84.54.95.45.65.95.70.01.02.03.04.05.06.07.01011121314151617184Q18 1Q19Net interest margin(%)3.97.66.97.77.35.65.24.65.74.80.01.02.03.04.05.06.07.08.09.011121314151617181Q181Q19Total loans at risk ratio(%)Note:Aggregated for MBB,ACB and VPB.Source:Company data,Credit Suisse estimatesNote:Aggregated for MBB,ACB and VPB.Source:Company data,Credit Suisse research1Q19 operating performance was the strongest at MBB with PPOP growth of 30%YoY,while bottom-line growth at ACB was aided by a net writeback of provisions in 1Q19.Adjusted for one-off upfront bancassurance income of D856 bn in 1Q18,VPBs net profit was impacted by a 22%YoY decline in bad debt recoveries(included under non-II as per Vietnam accounting standards),and a jump in provisions(+21%YoY).We expect a mid-single-digit negative earnings revision for VPB following the 1Q19 results.Figure 11:Profit growth slowed down at VPB due to weak recoveries and provisions jump(+21%YoY)1Q19 growth in PPOP and net profit(YoY,%)Figure 12:VPB likely to see high-single-digit negative earnings revision Profit before tax in VND tn3041316251911505101520253035MBBACBVPB*AggregatePPOPNet profit1Q19 growth(YoY,%)9.76.87.19.26.99.49.57.410.59.67.39.5024681012MBBACBVPB1Q19 annualised2019 CSe2019 consensusCompany guidance*Adj.for upfront bancassurance inc.in 1Q18.Source:Company data,Credit Suisse researchSource:Company data,I/B/E/S,Credit Suisse estimates7 May 2019Vietnam Banks Sector5Capital raising to be the focus in 2019Loan growth likely to be around mid-teensSequential loan growth in 1Q19 was the strongest at MBB followed by VPB.Loan growth momentum remained strong at FE Credit(+6%QoQ and 23%YoY)following a rebound in 4Q18,after virtually zero growth in 2Q18 and 3Q18.Figure 13:All the three banks registered flattish loan growth QoQ in 3Q186.73.04.33.76.218.312.122.121.922.50.05.010.015.020.025.0MBBACBVPB ConsolVPB ParentFE CreditQoQYoYSource:Company data,Credit Suisse researchBanks have a credit quota of 12-13%for 2019E from the SBV,which could be increased in 2H19 based on capitalisation and asset quality.With all the three banks adopting Basel II in 1H19,we expect the quota to be increased for them.Figure 14:We expect loan growth to slow down to mid-teens from high-teens in 2015-17YoY,%2010201120122013201420152016201720182019E2020E2021EMBB64.921.026.117.814.620.724.222.216.615.415.516.1ACB39.817.90.04.38.516.420.721.516.113.613.613.7VPB Consol.60.115.226.542.249.449.023.926.321.514.814.814.9System32.414.39.212.514.217.318.218.214.014.013.013.0Source:Company data,CEIC,Credit Suisse estimatesWe expect retail loan growth to remain the main driver for overall loan growth over the next few years,for the reasons discussed in our initiation report(Rising NIMs in Nam).However,we believe that even retail loan growth is likely to slow relative to the past on lower assigned quotas(both for banks and consumer financing companies),and as the consumer loans to GDP ratio has also increased to 23%as of 1H18 from a high single digits in 2014.MBB still has the lowest proportion of retail loans on its book(41%).Figure 15:Consumer lending(included under individual loans)should remain the main driver for loan growth in the next few yearsMBBACBVPB(as of 2018)VND bn%of total-5Y Cagr+3Y CagrVND bn%of total-5Y Cagr+3Y CagrVND bn%of total-5Y Cagr+3Y CagrState owned companies25,09711.711.711.61,6310.7-9.5-1.73,4091.518.65.0Private companies95,40244.411.28.095,49441.410.312.089,07240.126.215.0Foreign owned companies6,8933.251.30.08670.417.410.04000.212.05.0Co-operatives2760.1-28.3-7.21,9700.9122.810.0740.0n.a-15.0Individuals and others87,01940.542.525.0130,56656.623.415.0129,00758.141.215.0 o.w.standalone 75,23433.926.815.0 o.w.FE credit 53,77224.2n.a15.0Total gross loans214,686100.019.615.7230,527100.016.613.6221,962100.033.414.8Source:Company data,Credit Suisse research7 May 2019Vietnam Banks Sector6NIM to stabilise after widening 200 bp in past 5 yearsThe aggregated NIM for the three banks under our coverage contracted to 20 bp QoQ in 1Q19(but is still up 10 bp YoY).Asset yield expanded at MBB as the loan-to-deposit ratio(LDR)inched up,whereas it improved at VPB thanks to a higher loan yield at the parent company.We expect only a modest improvement in asset yield going forward(relative to the increase witnessed in the past couple of years)as the asset mix shifts towards loans,and within loans towards relatively higher yielding consumer loans(blended retail loan yields are typically around 10-12%vs corporate loan yields of 7-9%).The LDR is already stretched at VPB and MBB,with some scope for further expansion at ACB.Figure 16:Asset yield expanded at MBB and VPB Figure 17:LDR increased at both MBB and ACB6.76.87.37.37.67.87.77.87.78.28.08.18.27.98.07.98.58.28.28.28.48.18.08.18.78.312.513.013.815.115.415.015.615.3 15.2 15.214.915.115.58.99.19.410.110.2 10.210.3 10.310.210.310.110.4 10.56.08.010.012.014.016.018.01Q163Q161Q173Q171Q183Q181Q19MBBACBVPBAggregate69747877838583848587888995808279798079798282838285868910010311711712513113713213212813012378838587909292959596959899607080901001101201301401501Q163Q161Q173Q171Q183Q181Q19MBBACBVPBAggregateSource:Company data,Credit Suisse estimatesSource:Company data,Credit Suisse estimatesThe funding cost rose 30 bp QoQ on stronger growth in term deposits(+12%QoQ),a decline in demand deposits(-15%QoQ)and increase in deposit rates(generally 10-30 bp).The CASA ratio fell by almost 400 bp QoQ,and while it falls seasonally in 1Q usually as customers withdraw money for consumption around the festive season;the quantum of decline was higher this time.This could also be partly attributed to banks trying to lock longer tenure funds to meet tighter regulatory requirements.Figure 18:Funding costs increased Figure 19:leading to 20 bp NIM compression3.53.73.93.73.73.63.73.43.43.83.73.33.84.54.64.84.94.95.04.94.84.84.74.85.04.85.45.55.86.06.36.56.56.26.66.06.36.26.64.44.64.84.84.95.05.04.84.84.84.94.75.03.03.54.04.55.05.56.06.57.07.51Q163Q161Q173Q171Q183Q181Q19MBBACBVPBAggregate3.43.43.73.94.14.44.34.64.54.74.65.04.73.33.43.23.63.43.33.43.63.43.43.53.83.67.27.68.29.39.38.89.49.49.19.79.09.39.24.64.74.85.55.55.45.65.85.65.85.55.95.72.03.04.05.06.07.08.09.010.011.01Q163Q161Q173Q171Q183Q181Q19MBBACBVPBAggregateSource:Company data,Credit Suisse estimatesSource:Company data,Credit Suisse estimates7 May 2019Vietnam Banks Sector7We expect margins in 2019E to be still higher than full-year 2018,but to stabilise at 1Q19 levels.After expanding by 200 bp in the past five years,the NIM should stabilise as further modest improvement in the asset yield should be offset by higher funding costs.With mid-teen loan growth and broadly stable NIM,we expect mid-teen net interest income growth over 2019-21E.The table below also shows that high overall asset yield at FE Credit is a key driver for higher consolidated asset yield at VPB,but yield at the standalone bank is also high due to the higher proportion of unsecured lending.Figure 20:Summary of asset yields,funding costs and net interest margins(%)2010201120122013201420152016201720182019E2020E2021EAsset yieldMBB10.912.611.08.47.87.07.07.47.88.28.48.5ACB9.813.212.210.28.88.18.18.48.38.38.38.4VPB -consolidated9.915.412.911.810.211.813.414.914.715.215.315.3 -standalone12.911.710.29.89.29.99.810.210.410.5 -FE credit36.542.741.338.138.737.636.8Cost of fundsMBB6.77.96.54.74.03.43.73.53.53.83.94.0ACB6.89.07.87.05.74