MBB Update – OUTPERFORM

• MILITARY COMMERCIAL JS BANK (MBB)
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• We downgrade MBB from BUY to OUTPERFORM based on: (1) we reduce target price by 14.7% to VND25,600/share compared to the previous report due to adjusting the PBT forecast for 2024 to reduced by 7% and bad debt increased more than expected, and (2) the stock price has increased 11% since our last report, bringing the upside potential to 12.5%. Our new target price is equivalent to P/E of 6.6x and P/B of 1.2x at the end of 2024.
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• Q1/24 business results were not positive, as credit increased slowly, NIM decreased and provision costs increased sharply, causing PBT to decrease by 11.0% q/q and 7.8% y/y, to VND 5,795 billion, completing 20-21% of the full year plan and 20% of ACBS’s forecast.
• Profit in 2024 is forecast to stay flat due to high provision costs
• MBB’s profit plan to grow by only 6-8% in 2024, despite the credit growth target of 20-25%/year. However, we assess this modest profit growth plan to be reasonable as NIM for the whole year 2024 is forecast to decrease by 0.42 percentage points to 4.45% and bad debt risks are still present.
• NFI is expected to grow by 16.2% in 2024 thanks to the recovery of service income, forex trading, government bond trading and off-balance sheet NPL collection.
• We expect operating costs to continue to be tightly controlled and stay flat in 2024. CIR is forecast to decrease to 27.7% in 2024 from 31.5% in 2023.
• Provision costs in 2024 are forecast to increase by 80.6% to provision for new NPLs and strengthen the provision buffer, which is no longer thick (NPL coverage ratio was 80% by the end of Q1/24).
• PBT in 2024 is forecast to reach VND 28,271 billion, an increase of 7.5% compared to 2023.

View details in the attachment below.