• ACB managed to deliver strong earnings growth (33% YoY) in 1Q22, a rebound from the weak performance in 2H2021. Total operating income expanded steadily (21% YoY). CIR contributed negatively due to the high base effect. Notably, ACB posted net provision reversals thanks to the over-expected repayment of restructured loans. It became a major growth component.
• We factored in a recovery of restructured customers on a sector-wide basis in all our models, which will be reflected via weak demand for further Covid restructuring along with a modest rebound in NPL formation, and robust repayment of restructured debt. The forward 2022 book value per share is VND 21,181, translating to a forward P/B of 1.4x. The bank’s three-year and five-year P/B average are 1.8x and 1.9x, respectively. We see valuation pressure coming from the weak market sentiment as well as the re-rating due to the concern of earlier-than-expected policy rate hike. We maintain our target price at VND 42,000/share. This is equivalent to a BUY recommendation with an upside of 42% from the closing price of May 12, 2022.

Stable total operating income growth rate on the back of recovering NIM, robust balance sheet growth and written-off debt collection

Total operating income maintained its two-digit growth rate (21% YoY) in 1Q22 thanks to the extensive growth of revenue sources. Net interest income was still the major growth component that accounted for 79% of total revenue and directly made PBT expand by 14% YoY. Net fee income slowed down partly due to the high comparison base of bancassurance, while retail penetration on digital channel was supportive. Regarding other non-interest income, bad debt collection activities became the growth engine.