20171101_BSC_Vietnam company update_MBB_EN_ICB8355

We maintain our recommendation which is BUYING MBB with a 12-month target price of 26,000 VND per share, 15% upside on the current price. On 03/11/2017, MBB was traded at VND 22,650 per share, equivalent to P/B and adjusted P/B respectively of 1.36x and 1.70x, which is relatively cheap compared to other listed banks.

Investment Highlights
• Credit rose strongly by 17% in 9M2017. SBV approve to open credit growht cap of MBB from 16% to 20% in 2017.
• EAT accelerated by 43% yoy to VND 3,192 billion in 9M2017 thanks to interest income and non-interest income up by 40% and 84% yoy, respectively. Comparing to listed banks, profitability is high, NIM reached 4.15%, ROA was 1.46% and ROE was 14.63%. BSC expects the business results continue to improve thanks to the expansion of its business operations, the development of Mcredit, and good asset quality.
• Good bad debt handling: Besides the good asset quality as mentioned in the previous reports, dealing and recorvering bad debts are MBB’strength. Total provision for bad debts used in 9M2017 was VND 1,024 billion, while for the whole 2016 is VND 700 billion. Recovery of bad debt off-balance sheet reached VND 582 billion, while in the same period 2016 was VND 390 billion. Net value of VAMC bonds after deducting provision funds decreased sharply to VND 1,043 billion, comparing to the balance of VND 2,156 billion at the end of 2016.

Catalysts
• Selling 49% of Mcredit Capital to Shinsei Bank
• Transfering of MBland

Investment Risks
• High competition, reducing MBB's growth prospects
• NPLs increased, especially after Mcredit went into operation