MBB – NIM contraction, credit costs pressure earnings growth – Earnings Flash
  • 2024-04-22T00:00:00
  • Company Research

MBB released its consolidated results for Q1 2024 with PBT of VND5.8tn (USD232mn; -11% YoY), completing 19% of our full-year forecast. An abnormal income from trading securities supported earnings. Overall, we see potential downside risk to our forecasts due to the higher-than-expected deterioration in asset quality and NIM contraction. 

  • Q1 2024 consolidated credit growth was 0.3%, which was derived from (1) loan growth of 0.7% and (2) a 4.4% decrease in MBB’s corporate bond balance vs Q4 2023. As of Q1 2024, corporate bonds accounted for 5.6% of MBB’s total credit exposure (vs 9.2% as of Q4 2022). Additionally, lending to real estate businesses accounted for 7.4% of MBB’s total loan book (vs 4.6% in 2022). 
  • Q1 2024 customer deposits decreased 1.5%. The Q1 2024 CASA ratio was 36.6% (-3.6 ppts QoQ) vs the bank’s target of around 40% this year. 
  • Q1 2024 NIM of 4.05% (-25 bps QoQ) was lower than our full-year forecast of 4.83%. MBB’s Q1 2024 credit growth was flat after strong growth in Q4 2023. Interest income decreased in the last three quarters. We think this could be partly due to MBB’s lowered lending rates to support its customers as management stated in its recent AGM. The bank said that they expect an upward pressure on lending rates at MBB towards the end of 2024F. Additionally, we think the (1) decreasing retail lending portion (45% in Q1 2024 vs 48% in 2022) and (2) continuing NPL formation could have hindered the bank’s NIM. 
  • Q1 2024 NOII of VND3.0tn increased 73% YoY (+14% QoQ) and fulfilled 30% of our full-year forecast due to a one-off income of VND1.1tn from selling trading securities. Meanwhile, Q1 2024 pure NFI of VND945bn increased 37% YoY but decreased 35% QoQ mainly due to weak fee income from insurance business. 
  • Q1 2024 the consolidated CIR of 29.2% was lower vs our full-year forecast of 31%. At MBB’s recent AGM, management targeted to control the CIR below 30%. 
  • Bad debt metrics surged in Q1 2024. The Q1 2024 consolidated NPL ratio increased 88 bps QoQ to 2.49% (vs our full-year forecast of 1.50%) while the Group 2 loan ratio was relatively flat at 2.29% (vs our full-year forecast of 2.00%). The bank stated that NPL ratio before CIC reclassification was around 1.60%. 
  • Q1 2024 provision expenses surged 46% YoY (70% QoQ) from a low base and tracked ahead of our expectations. We note that MBB was one of the few banks that reported a YoY decrease in 2023 provision expenses. Q1 2024 write-offs to gross loans were 1.28% (vs 1.08% in 2023). MBB’s Q4 2024 LLR decreased to 80.1% (vs 117.0% 2023). MBB targets LLR to be above 100% in the long term.

MBB’s consolidated Q1 2024 results

VND bn

Q1 2023

Q1 2024

YoY

NII

         10,227 

          9,062 

-11.4%

Non-interest income

            1,703 

           2,954 

73.5%

OPEX

        (3,568)

         (3,514)

-1.5%

PPOP

           8,362 

           8,502 

1.7%

Provision expenses

         (1,850)

        (2,707)

46.4%

NPAT-MI

           5,024 

           4,533 

-9.8%

 

 

 

 

Loan growth**

4.5%

0.7%

-3.8 ppts

Deposit growth**

2.0%

-1.5%

-3.5 ppts

 

 

 

 

NIM

5.73%

4.05%

-169 bps

Interest-earning asset yield

9.74%

7.26%

-248 bps

Cost of funds

4.61%

3.73%

-88 bps

CASA ratio*

35.5%

36.6%

1.1 ppts

CASA ratio plus term deposits in FX

36.6%

37.8%

1.2 ppts

CIR

29.9%

29.2%

-0.7 ppts

 

 

 

 

NPLs / Gross loans

1.76%

2.49%

73 bps

Group 2 loans / Gross loans

3.46%

2.29%

-117 bps

Accrued interest / IEAs

1.13%

0.98%

-16 bps

Source: MBB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q1 2023 and Q1 2024 loan and deposit growth is QoQ growth.

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