{"id":60587,"date":"2020-05-08T08:17:30","date_gmt":"2020-05-08T01:17:30","guid":{"rendered":"https:\/\/yuanta.com.vn\/?post_type=phan-tich&#038;p=60587"},"modified":"2020-06-05T14:45:26","modified_gmt":"2020-06-05T07:45:26","slug":"banks_camel_1q20_update","status":"publish","type":"phan-tich","link":"https:\/\/yuanta-uat.ysvn.com.vn\/en\/analysis\/banks_camel_1q20_update","title":{"rendered":"Banks_CAMEL_1Q20_Update"},"content":{"rendered":"<p><strong>Themes and catalysts<\/strong><\/p>\n<ul style=\"list-style-type: square\">\n<li><strong>The sector\u2019s 1Q20 results were weak <\/strong>\u2013 no major surprise there<strong>.<\/strong><\/li>\n<li><strong>Sector NIM<\/strong> fell 8bps vs. 2019.<\/li>\n<li><strong>CASA deposits<\/strong> fell 11% vs. 2019.<\/li>\n<li><strong>1Q provisioning<\/strong> +24% QoQ\/+34% YoY.<\/li>\n<li><strong>1Q PATMI &#8211;<\/strong>11.4% QoQ\/+3.3% YoY.<\/li>\n<li><strong>2Q20 is likely to be worse<\/strong> given falling yields &amp; fees and rising credit costs.<\/li>\n<\/ul>\n<p><strong>Trends and Risks<\/strong><\/p>\n<ul style=\"list-style-type: square\">\n<li><strong>Earnings forecasts for 2020E appear stretched<\/strong> (including our own).<\/li>\n<li><strong>Credit costs &amp; loan loss reserve ratios are key to monitoring asset quality in 2020&#8230;<\/strong><\/li>\n<li><strong>\u2026 whereas NPL ratios are less meaningful. <\/strong>Even in normal times, NPL recognition guidelines mean that a bank\u2019s NPL ratio is a lagging indicator of its asset quality. But current policy actually <em>requires<\/em> banks to engage in extend-and-pretend behavior.<\/li>\n<\/ul>\n<p><a href=\"http:\/\/yuanta-uat.ysvn.com.vn\/wp-content\/uploads\/2020\/03\/VCB_Company-Update_03.27.2020.pdf\"><strong>VCB (BUY)<\/strong><\/a><strong> remains Vietnam\u2019s No. 1 CAMEL-ranked bank<\/strong>. Its loan loss reserve (LLR) ratio of 235% (+53ppt QoQ\/+66ppt YoY) reflects VCB\u2019s prudent approach to building a strong buffer against probable asset quality deterioration due to Covid-19. The macro outlook in 2020 is not great, but VCB remains the highest-quality bank and we see it as the best available play on a still-positive longer term macro story for Vietnam.<\/p>\n<p><strong>TCB (Not rated), ACB (Not Rated), and <\/strong><a href=\"http:\/\/yuanta-uat.ysvn.com.vn\/wp-content\/uploads\/2020\/04\/MBB_Company-Update_14.04.2020.pdf\"><strong>MBB (BUY)<\/strong><\/a><strong> round out the top three<\/strong>. TCB has supplanted MBB as the No.2 CAMEL-ranked bank in our <a href=\"http:\/\/yuanta-uat.ysvn.com.vn\/wp-content\/uploads\/2020\/02\/Banks_CAMEL_07.02-2019_Updated.pdf\">4Q19 CAMEL update<\/a>. TCB\u2019s asset quality has improved slightly (i.e. 1Q20 NPL ratio of 1.09% was down 24bps YTD; LLR ratio was up 23ppt YTD to reach 118% in 1Q20). However, TCB\u2019s higher ranking was largely due to the decrease of other banks\u2019 CAMEL scores.<\/p>\n<p><a href=\"http:\/\/yuanta-uat.ysvn.com.vn\/wp-content\/uploads\/2020\/04\/STB_Company-Update_04.24.2020.pdf\"><strong>STB (BUY)<\/strong><\/a><strong> CAMEL score of 2.9 decreased slightly QoQ, but its ranking jumped from 9<sup>th<\/sup> to 7<sup>th<\/sup> place. <\/strong>Crucially, STB\u2019s asset quality continues to improve, as its NPA ratio (largely legacy bad assets) declined to 15.8% in 1Q20 (-90bps QoQ\/-4.1ppt YoY). The crisis may slow STB\u2019s turnaround momentum, but its 14% loan growth CAGR in 2016-19 (vs the sector\u2019s 16%) suggests relatively low new NPL formation risk.<\/p>\n<p><strong>In the current dismal operational outlook, investors should focus on quality. <\/strong>This informs our top pick call. VCB \u2019s 2.5x 2020E P\/BV multiple is highly attractive vs its five-year trailing average of 3.0x (see Figure 1 inside) and longer term 20%-plus ROE outlook. For those seeking greater risk\/reward, we would add STB<\/p>\n<p>For the complete report, please access here: <a href=\"http:\/\/yuanta-uat.ysvn.com.vn\/wp-content\/uploads\/2020\/05\/Banks_CAMEL_1Q20_Updated.pdf\">Banks_CAMEL_1Q20_Updated<\/a><\/p>\n<p><strong>Analyst: Tanh Tran<\/strong>,\u00a0<em>tanh.tran@yuanta.com.vn<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Themes and catalysts The sector\u2019s 1Q20 results were weak \u2013 no major surprise there. Sector NIM fell 8bps vs. 2019. CASA deposits fell 11% vs. 2019. 1Q provisioning +24% QoQ\/+34% YoY. 1Q PATMI &#8211;11.4% QoQ\/+3.3% YoY. 2Q20 is likely to be worse given falling yields &amp; fees and rising credit costs. Trends and Risks Earnings&#8230;<\/p>\n","protected":false},"author":10,"featured_media":0,"template":"","class_list":["post-60587","phan-tich","type-phan-tich","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.3 (Yoast SEO v23.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Banks_CAMEL_1Q20_Update | Yuanta Vietnam<\/title>\n<meta name=\"description\" content=\"Themes and catalysts The sector\u2019s 1Q20 results were weak \u2013 no major surprise there. Sector NIM fell 8bps vs. 2019. 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