INVESTMENT THESIS

• Prudential business model. ACB is one of the best asset quality banks in the system (stable NPL<1% since 2016). The bank owns loyal retail customers base (individual and SME) accounting for more than 90% total credit (the highest in the system) which helps to maintain a stable growth rate, high profit margin and mitigating risks. In addition, the strength in government bond investment with the scale ranked top 4 sectors (follow SOBs), accounting for 13% of TTS helps maintain a high and stable interest income component.
• The bancas agreement with Sunlife generates a steady upfront fee ($500 billion a year over 15 years), while setting the growing basis for the bank’s non-interest income.
• ACB focuses on secured lending and proactively sets up provisions. The quality of assets is among the best in the sector, LLCR has reached 200%.

RISKS

The impact of covid on the asset’s quality is the biggest issue at present. Social distancing lasts for 3 months caused the bank’s credit growth rate to decrease by 2% in the third quarter (from 9.5% ytd to 7.5% ytd), PBT sharply decreased by more than 20%qoq. The restructured loan increased sharply to VND 13,000 billion, +5,000 billion.

RECOMMENDATION

Assuming that ACB continues to maintain a stable credit growth rate of 13%-14% per year, NIM averaging 3.7% and CIR 37% in the period 2021-2023, we determine the target price for ACB shares as 37,000VND/share. Along with the fact that the P/B of the stock is at 2.16, which is relatively reasonable compared to peers, we recommend “HOLD” ACB shares with a long-term target price (6-18- month investment term) of 37,000VND/ share, corresponding to an expected return of 14.9%.