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Title 20171208_BSC_Vietnam company update_EN_EIB_ICB8355
Report Type Phân tích công ty
Source BSC
Industry Financials
Bussiness EIB
Detail Date : 12/12/2017
Total pages : 6
Language : English
File Type : .PDF
FileSize : 630 Kb
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Short Content

Investors should be concerned about EIB’s asset quality and the progress of handling bad debt.
•    Bad debt declined in absolute terms, however, the rate of decline was slow. Total non-performing loans reached VND 2,350 billion at the end of Q3/2017, bad debt ratio was 2.46%, still high compared to listed banks. The face value of VAMC bonds was VND 6,303 billion, the net value of VAMC bonds after deducting the provision was VND 4,745 billion. Including debt sold to VAMC, bad debt ratio increased to 7.08%. Interest and fees remained high at VND1,264 billion, equivalent to 1.32% of total outstanding loans. Assets transfering from collaterals up to 1,218 billion. EIB also has VND 238 billion of receivables from transfer of shares, which will mature in 2018 and 2019. If the bank can recovers these receivables, cash flow from operations will be better, however, in the opposite direction, if the bank can not recovery of these receivables, the provision go up. Concerned assets as our calculated to be at VND 10,609 billion, equivalent to 77% of the bank's equity.
•    Low provision for bad debt and VAMC bonds. EIB's bad debt coverage ratio was one of the lowest among listed banks, reaching 41% at the end of September 2017, just above STB (19%). The provison of VAMC only accounted for 25% of their par value, while many banks are going to/expected to close the VAMC bond outstanding in 2018. We believe that In the coming time, EIB should continue to focus on handling bad debt and provisioning. This can be done if the core business activity improves.
•    Accumulated 9M2017, the bank recovered VND 145 billion of bad debt processed, 3.3 times higher than the same period, however, still lower than the size of bad debt of EIB. Compared to many other banks, EIB-related events have been noticed and under scrutiny since the end of 2014, so we think that most of the bank's worst spots have been cleared. We expect the resolution of the 42th National Assembly on the handling of bad debts and collateral of credit institutions will actively support the EIB. The current question are leadership and the quality of human resources involved in dealing with bad debt.

Technical analysis: EIB rebounded from the bottom in mid-November and then accumulated in couple of sessions and continued to breakout today. The overbought RSI together with high liquidity are positive signals. In addition, the “two bottom” model supports the price level of 13.5-14.