Glowing long-term prospect_Outperform

In the short term, the banking sector will be hit by the 4th Covid outbreak, causing the third quarter credit growth to slow down somewhat. Provision expenses pressure and interest rate support packages would reduce profit growth compared to the 1st haft.

However, after reviewing, we assumed that NIM overall would only slightly decrease by about 0.2%-0.3% in the second half of the year. Moreover, some banks can still maintain high NIM (TCB, TPB) thanks to their low funding cost advantage in market 2.

Policy is the most important factor contributing to the sector’s asset quality under control. In 1H2021, many banks have sharply reduced restructuring loan as well as NPL, while debts collection has been escalated, provision expenses also increased. Those actions partly reduce the pressure for the second half of the year.

There would be less catalysts in 2H2021 as most banks have completed dividend payment as well as important deals have been unveiled (as at VPB).

RECOMMENDATION

With the above discussions, we maintain an “Outperform” rating for the Banking sector.

We expect total credit growth of the economy at 9%-10% in 2021, NIM averaged at 3.3% and profit growth of 30%yoy.

Regarding the investment ideas for the next 6-18 months, we are interested in stocks with positive business prospects, effective business models, good asset quality with a high bad debt coverage ratio. Accordingly, we select TCB, MBB, CTG and VCB as potential investment.