Asia Commercial Bank (ACB) released inline results for Q1 2020 with NPAT-MI of VND1.5tn (USD66mn, +12.5% YoY), completing 22.1% of VCSC’s full-year forecast. Annualized Q1 2020 ROA and ROE stood at 1.6% and 21.5%, respectively.
According to a report from VietCapital Securities (VCSC)’s research division, NIM of the bank increased by 9 bps to 3.68% on YoY basis (-5 bps QoQ). Both lending and deposit activities were slow in Q1 2020 with 2.3% and 1.5% YTD growth, respectively. Interest earning asset (IEA) yields tracked up by 23 bps YoY (-17 bps QoQ) to 8.45% in Q1 2020. Meanwhile, cost of funds followed with a 22-bp YoY increase (-9 bps QoQ) to 5.08%.
“We believe the 2.9x increase in valuable papers balance from USD341mn to USD986mn in the last 12 months coupled with an 85-bp YoY drop in CASA and term deposits in foreign currencies to 18% of total customer deposits are the main factors that resulted in increased cost of funds in Q1 2020.” VCSC reported.
Earnings from FX trading and investment securities outperformed while net pure fee income became stable in Q1 2020. Expenses related to fees climbed by 58.4% YoY whereas income observed a slower increase of 18.1% YoY, which subsequently resulted in no change YoY in absolute net fee income in Q1 2020. Additionally, gains from investment securities were VND349bn/USD15mn vs VND18bn/USD770,000 in Q1 2019. This item accounted for 36.4% of non-interest income (NoII) and was the second largest contributor behind pure net fee income of 38.7%. Meanwhile, income from FX trading surged by 77.4% YoY to VND143bn/USD6mn, contributing 14.9% to NoII.
CIR trended up by 237 bps due to a surge in staff expenses. Employee expenses soared 87.8% YoY to VND1.6tn/USD67.8mn in contrast to a 1.4% decrease in the bank’s headcount in the last 12 months. Staff expenses accounted for 67.0% of OPEX in Q1 2020.
Balance sheet numbers reflect strong asset quality; however, they do not convey much color regarding the evolving COVID-19 situation. NPL ratio dropped by 3 bps YoY to 0.66% (+9 bps QoQ). Accrued interest over total interest earning-assets also tracked down by 2 bps YoY to 0.81%, mirroring the downward trend of the weight of the bond book (including Government bonds, bank bonds and corporate bonds from 15.2% of interest earning assets (IEAs) in Q1 2019 to 14.9% at the end of Q1 2020). Loan loss reserve (LLR) was 148.3% of NPLs vs 158.1% in Q1 2019 and 174.9% in Q4 2019.
Meanwhile, ACB reported provision expenses of VND93bn/USD4mn, equivalent to an annualized credit cost of 0.12% in Q1 2020.
“We suspect the bank continued to engage in a reversal of the specific provision account within the first three months of 2020; however, the presentation of the provision balance in its financial statement makes it difficult to work out precisely.” said VCSC.
Founded in 1993, ACB is the fourth smallest bank among our coverage banks by total assets as of December 31, 2019. ACB has the fifth-largest network among our ten coverage banks. The bank listed its shares in November 2006 and primarily focuses on the retail and SME segments.