Summary of the 2020 9M results of Asia Commercial Bank (ACB VN)
9M/2020 results: highlights
- ACB’s credit and deposit growth in 9M/2020 were 16.2% y/y and 12.3% y/y, respectively, thanks to retail and SME clients. The banks’ loan book remained healthy, with 0.8% non-performing loans (NPL) by the end of Sep. Loans to clients who were impacted by the COVID-19 outbreak are allowed by the State Bank of Vietnam to retain in the current loan group. This group is equal to 3.1% of ACB’s loan book, and will be called ‘restructured loans’ in this report.
- Pre-provisioning profit increased by 24.2% y/y, mainly driven by (1) a robust net interest income and investment income, which caused the total operating income to rise by 14.9% y/y; and (2) well-controlled operating expenses. Nevertheless, net profit only increased by 15.4% y/y as ACB increased its provision expense by 328.6% y/y to maintain an adequate loan loss provision ratio.
- Capital Adequacy Ratio (CAR) by the end of Sep was 10.7%. ACB submitted its application to list on Ho Chi Minh Stock Exchange in December 2020.
- As COVID-19 is under control in Vietnam by now and businesses are mostly resumed, the amount of restructured loans are unlikely to increase. We think ACB’s asset quality is solid thanks to a good customer base and little exposure to risky segments. We expect ACB’s 2020 & 2021 provision expense worth of 1% loan book.
- For 2020, net profit is expected to grow by 7.2% y/y, lower than the 9M/2020 result, because we expect ACB to make more provision in Q4 to take advantage of good pre-provisioning profit in 9M/2020.
- For 2021, we expect a rebound in main income streams, enabling total operating income and net profit to grow by 12.2% y/y and 13.9%, respectively. The potential exclusive bancassurance upfront fee has not been factorized into our valuation.
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