SSI Securities has simply launched an evaluation report on VPBank and its subsidiary FE Credit score.
In keeping with SSI, though FE Credit score goes by way of a tough interval when accelerating dangerous debt write-offs and low income in 2021, a gradual restoration is anticipated in 2022. Apart from, the potential for a gradual restoration is anticipated. Profitability on the father or mother financial institution could also be higher than anticipated in 2022 due to the upcoming capital sources. Internet revenue from FE Credit score divestment and personal placement proceeds will help the financial institution’s formidable long-term development plan. Consolidated pre-tax revenue (PBT) in 2021 and 2022 is forecast to succeed in VND 16.Eight trillion (up 29%) and VND 21.Four trillion (+27% y/y) respectively.
Optimistic components supporting VPB shares would be the favorable renegotiation of bancassurance contracts with an extra pay as you go price and an issuance plan for strategic buyers at a positive value. Nevertheless, the danger issue is larger than anticipated dangerous debt formation price and decrease than anticipated dangerous debt assortment; The issuance to strategic buyers just isn’t on schedule.
The analyst staff stated that VPB’s revenue within the second quarter of 2021 was shocking given the conflicting outcomes between the father or mother financial institution and FE Credit score. Though the father or mother financial institution’s better-than-expected revenue of VND4.7 trillion (+123% y/y), EBT was decrease than anticipated at its subsidiary – FE Credit score, at solely VND358 billion (+358 billion). down 76 % over the identical interval).
Progress on the father or mother financial institution was properly maintained due to house loans, elevated NIM and working revenue (VND 1.Four trillion). In the meantime, FE Credit score struggled with sluggish mortgage development, excessive provisioning bills and narrower NIM.
All revenue sources of VPBank grew strongly. With a excessive NIM ratio, the financial institution’s web curiosity revenue (NII) reached VND5 trillion, up 47% y/y. In the meantime, web non-interest revenue (non-NII) (excluding dividends from FE Credit score) was VND3 trillion, up 165% y/y.
SSI assesses that financial institution asset high quality has improved, however wants a bigger danger buffer. Because the financial institution wrote off 1.Four trillion dong of dangerous debt within the second quarter of 2021 and put aside one other 1.7 trillion dong, the dangerous debt protection ratio improved to 57.8% (in comparison with 50.7% within the earlier quarter). finish of 2020).
“We see this as an try by the financial institution to ameliorate its weak spot, because the LLCR ratio at 58% is the best since 2012. NPL ratio on the father or mother financial institution fell barely to 2.1 % (vs 2.17% in 1Q2021), whereas Group 2 debt was unchanged, at 4.01%,” the evaluation staff stated.
For FE Credit score alone, all indicators and coefficients of FE Credit score had been unfavorable within the second quarter of 2021 with a lower in excellent loans (down 7.2% in comparison with the start of the 12 months or 4.7 trillion dong). Whole working revenue (TOI) additionally fell 9% year-on-year, whereas NIM contracted 143 foundation factors, dangerous debt ratio spiked to 9.1% and LLCR fell to 32%.
Nevertheless, SSI additionally believes that the lower in excellent loans is as a result of the corporate actively prioritizes debt assortment over new disbursement and promotes dangerous debt write-off.
The proportion of dangerous money owed written off in whole excellent loans ranged from 4.2% to 4.9% prior to now three quarters, a lot larger than when the corporate resolved its report dangerous money owed in 2018 and 2019. This exhibits that the corporate is making efforts to take care of excellent dangerous money owed. After a number of quarters of selling debt assortment and dangerous debt write-off, credit score dangers associated to loans earlier than the Covid-19 epidemic shall be partly resolved. This might spur a stronger restoration for FE Credit score when the Covid-19 scenario improves.