VCBS: ACB profits may increase by 22pct

26-Feb-2021 Intellasia | NDH | 7:31 AM Print This Post

Vietcombank Securities (VCBS) has released a report on Asia Commercial Joint Stock Bank (HoSE: ACB). The securities company estimated that ACB can gain 11.967 trillion dong in pre-tax profit in 2021, up by 22.6 percent compared to 2019, equivalent to an EPS of 4,353 dong per share and BVPS of 20.665 dong per share.

Along with the trend of reducing the savings interest rates in the entire system, the listed savings interest rate of ACB dropped by 1.25 two percent in 2020. The lower savings interest rates slowly influenced the interest expenses in the first half of 2020, and started to have major impacts in the third and the fourth quarters, with interest expenses ratio at 4.6 percent and 4.2%.

The slower reduction in lending interest rates compared to the reduction in savings interest rates helped ACB’s Net Interest Margin (NIM) increase and become the biggest contributor to ACB’s high profit growth in the third and the fourth quarters. VCBS said that this short-term difference will continue to help ACB have high profit growth in the first half of 2021.

ACB’s credit growth will grow faster than the industry’s average with further focus on individual customers and Small and medium-sized enterprises (SMEs). These two groups accounted for 93 percent of ACB’s outstanding credit by the end of 2020, and ACB is the bank with a fairly optimal customer structure. ACB’s credit growth was higher than the increase of the entire system in 2020, and is expected to continue to be maintained at a high level in the near future. VCBS forecasted ACB’s growth at 16.1 percent in 2020. The cost of capital will grow faster than the yields of interest-earning assets.

The bank also cooperates to distribute insurance at an Upfront fee of 8.5 trillion dong. ACB is likely to record the Upfront fee which spread evenly over the 15-year period, equivalent to a profit of 560 billion dong per annum, starting from 2021. The fee received is equivalent to 24 percent of ACB’s equity, 2.4 percent of the bank’s mobilisation fund, and will help ease ACB’s capital mobilisation growth pressure in the medium term and contribute to the capital cost reduction.

ACB spent December preparing to sell insurance and officially sell insurance products under the model of having bank employees directly consulting with customers. The bank took the lead in the whole system in January with premium revenue of 137 billion dong (calculated based on Annual Premium Equivalent (APE)).

The report also mentioned that ACB’s government bond portfolio has a higher market value than book value. A large proportion of ACB’s 69.117 trillion-dong government bond portfolio was purchased from the time when the market bond yields remained high and at present, the market value is higher than the book value. The government bond yield in 2020 was 4.6 percent and the average duration was about three years. the difference between market value and book value is estimated to be trillions of dong.

ACB shares are likely to be added to the index baskets including VNDiamond in the April portfolio reversal, VN30 in the June portfolio reversal, and some other indices. At that time, the index investment funds following the above indices will buy in ACB shares.

However, VCBS said that despite its good asset quality, ACB will still incur an increased risk of bad debts in the case when the disease spreads out of control. The bank’s bad debt ratio by the end of 2021 is expected to be 0.7%, and the bad debt coverage ratio is 155%.

 

Category: Finance, Vietnam

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