Company Quarterly Earnings Update – ACB VN – 2021 Q1

Summary of the 2021 Q1 results of Asia Commercial Bank (ACB VN)

Q1/2021 results: highlights

  • ACB’s credit growth in Q1/2021 was 4.1% YTD thanks to retail and SME clients, while customer deposit plateaued. Asset quality remains healthy, with the non-performing loans (NPL) at 0.9%. Loans affected by COVID-19, which are retained by a current loan group (restructured loans) declined by 5.6% YTD to 2.6% of ACB’s loan book.
  • Pre-provisioning profit increased by 79.0% y/y, driven by higher NIM (+70 bps y/y), strong growth in fee income (68.7% y/y) and effective cost management. Provision expenses surged but from a low base. Therefore, net profit increased by 62.6% y/y.
  • Capital Adequacy Ratio (CAR) by the end of March was 11.1%. In November 2020, ACB signed a 15-year exclusive bancassurance partnership with Sunlife Vietnam. ACB will receive an equal annual payment over 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 remains retail and SME clients. In the next one to two years, ACB is still able to grow thanks to its loyalty customer base and new income sources like bancassurance. However, we think ACB is likely to lag in the long run due to its inactive strategy.
  • We estimate 2021F net profit to increase by 19.7%, which is 5.6% higher than our previous forecast because: (1) NIM and fee income are extended by 10 bps and 9% respectively; (2) provision expenses will be cut as we expect more clients to recover and the effectiveness of Circular 03/2021, which allows banks to split provision expenses into 3 years, starting from 2021.
  • For 2022, we forecast net profit to increase by 12.6% y/y due to similar factors of 2021, but provisioning pressure will reduce significantly.

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