- 2021-08-02T00:00:00
- Company Research
BID released H1 2021 results with TOI of VND31.7tn (USD1.4bn; +42.9% YoY) and NPAT-MI of VND6.4tn (USD276mn; +87.4% YoY), achieving 54.0% and 57.7% of our FY 2021 forecasts, respectively. The increase in the bottom line was mainly due to (1) a 46.2% YoY increase in NII, (2) 39.2% YoY increase in pure NFI, (3) 119% YoY increase in net other income and (4) 9.0% YoY increase in OPEX that significantly lagged TOI growth, which were partly offset by a 48.9% YoY increase in provision expenses. BID’s H1 2021 results were slightly ahead of our forecast; however, given the impact of the fourth wave of COVID-19 in Vietnam and BID’s new lending rate cut program for customers in H2 2021, we see no material changes to our earnings forecast for BID, pending a fuller review. NII delivered strong 46.2% growth in H1 2021 that was mainly driven by a 78-bp YoY increase in NIM. BID reported the third highest YoY NIM expansion across our coverage universe (78 bps YoY to 3.03%) as of H1 2021, which was mainly thanks to a 139-bp YoY decrease in COF that outweighed a 54-bp YoY decrease in IEA yield and (2) a relatively faster pace of loan growth relative to deposit growth in 6M 2021 (6.8% and 5.5%, respectively). We attribute the decrease in COF to a series of deposit rate cuts by the State Bank of Vietnam (SBV) as well as a 2.8-ppt YoY increase in CASA ratio. Meanwhile, the decrease in IEA yield was mainly due to BID’s lending rate support package for customers, in our view. According to the bank, VND2.5tn of interest income was sacrificed in H1 2021 to support customers affected by COVID-19. On a QoQ basis, Q2 2021 NIM increased by 35 bps as a result of a 14-bp QoQ decrease in COF together with a 21-bp QoQ increase in IEA yield. NOII surged 33.9% YoY with pure NFI and net other income as the key drivers. BID reported NOII of VND8.1tn (+33.9% YoY), which was mainly driven by (1) a 39.2% YoY increase in pure NFI to VND3.2tn, (2) 36.0% YoY increase in gains from trading securities to VND572bn and (3) 119% YoY increase in net other income that was derived from bad debt recovery, according to the bank. These items were partly offset by a 3.9% YoY decrease in gains from FX trading and VND493bn loss in investment securities (vs a gain of VND669bn in H1 2020). H1 2021 CIR of 25.6% was the lowest first-half level in the last three years. H1 2021 OPEX increased by only 9.0% YoY amid a 42.9% YoY increase in TOI. Provision expenses increased 48.9% YoY as of H1 2021 despite VAMC provisioning dropping out of the picture as well as a 37-bp YoY decline in the Q2 2021 NPL ratio. We attribute the significant increase in H1 2021 provision expenses to (1) additional provision expenses for restructured loans under Circular 03 and (2) BID’s efforts to build up its provisioning buffer amid the economic uncertainty caused by COVID-19. Q2 2021 LLR increased to 131.3% and was the highest level on a quarterly basis in the last three years. Credit quality improved in Q2 2021. The Q2 2021 NPL ratio decreased to 1.63% (-14 bps QoQ and -37 bps YoY). Group 2 loans relative to gross loans decreased 72 bps YoY to reach 1.09% in Q2 2021. Q2 2021 accrued interest over IEAs decreased to 0.79% (-3 bps QoQ and -14 bps YoY). Q2 2021 receivables decreased on both an absolute level and relative level (over total assets). BID recorded VND6.7tn of write-offs in H1 2021 — equivalent to a write-off rate over gross loans (not annualized) of 0.52% vs 0.39% in H1 2020. |