Company Quarterly Earnings Update – ACB VN – 2020

Summary of the 2020 results of Asia Commercial Bank (ACB VN)

FY2020 results: highlights
  • ACB’s credit and deposit growth in FY2020 were 15.9% y/y and 14.6% y/y, respectively, thanks to retail and SME clients. Asset quality remains healthy, with the non-performing loan (NPL) was 0.6% by Dec 2020. Loans to clients impacted by COVID-19 are still allowed to retain in the current loan group (called restructured loans, not NPL). This group made up 2.9% of ACB’s loan book.
  • Pre-provisioning profit increased by 21.8% y/y, driven by high total operating income and effective cost management. Provision expense declined by 54.1% y/y, which supported net profit to increase by 27.8% y/y. Despite less provision expense, the bank’s loan loss provision ratio was still at 154%, one of the highest in the sector.
  • Capital Adequacy Ratio (CAR) by the end of Dec was 10.7%. In November 2020, ACB signed the 15-year exclusive bancassurance partnership with Sunlife Vietnam. ACB will receive an equally annual payment in 15 years (~ $25mn/year).
2021 & 2022 Outlook
  • ACB has solid fundamentals, thanks to its prudent lending approach and excellent customer profile. The growth engine of ACB in the next few years remains to be retail and SME clients. Although ACB’s business model is traditional, it still acquires more customers, gain market share on the credit market thanks to its focus on investment in improving customer experience. The bank is also diversifying its income structure via services like bancassurance to bolster its growth momentum.
  • For 2021, we expect ACB’s total operating income to increase by 15.0% y/y driven by (1) strong credit growth as low-interest rate triggers demand for mortgages while corporates resume their investment plan; and (2) better growth of bancassurance. Operational expenses are expected to be well controlled, and provision expense is likely to increase to utilize good income growth. Overall, we project 2021F net profit to increase by 13.3% y/y.
  • For 2022, we forecast net profit to increase by 16.1% y/y due to similar factors in 2021, but provisioning pressure will reduce significantly.
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