Analyst Pin-board OCB – On-going preparation for bad debt formation
- Q3 credit growth was robust while deposit growth slowed down. The bank expected a new credit quota in the fourth quarter of over 20%, in comparison to 10% currently.
- Q3 PBT posted VND 1,107 billion (USD 48 mn, +71% YoY), mainly driven by growth of interest income (+25% YoY) and realizing profit from government bonds (+400% YoY).
- The provision buffer just improved slightly. However, we saw a positive signal that the bank is preparing provision buffer for the lag in bad debt and structured debt formation, which will surge in Q4.
- We appreciate changes in asset quality the bank is making to face the coming rising bad debts. In 2022 and midterm, we believe NIM will sustain at a level higher than 4% due to the lower funding costs of valuable paper. That coupling with the high credit growth, the high secured loan ratio and the expanding non-interest income will give room for the bank to control credit costs while maintain high earnings growth. As a result, earnings forecast of 2021 and 2022 are unchanged at VND 5,513 bn (USD 240 mn, +25% YoY) and VND 7,115 bn (USD 309 mn, +29% YoY). Our target price for OCB is kept at VND 32,100/share. This translates to an upside of 19% from the closing price of October 25th, 2021 and an ACCUMULATE The stock has outperformed the sector in recent sessions thanks to its Q3 earnings growth higher than the sector.
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