20160706_BSC_Vietnam Company Update_EN_MBB

We maintain BUY recommendation on MBB at target price of VND 16,600 per share (upside 9.2%). On July 6th 2016, MBB is traded VND 15,100 per share, equal to a P/E FW of 9,7x and P/B of 1,06x, which is relatively attractive compared to other banks (median of P/E and P/B are 15,13x and 1,09x, respectively). MBB is one of 2 banks which profit are expected to soar thanks to lower provision expenses and high growth credit. MBB is a favorite stock of foreign investor.
Credit is expected to rise in 2016 due to (1) low LDR of 66.83%; (2) strong CAR of 12.85% at the end of 2015; (3) promoting loans to private and SMEs.
Business result is expected to improve thanks to (1) lending promotion; (2) larger propotion of demand deposit which brings lower mobilizing interest; (3) provision expenses for credit losses is preditected to decrease from 2017. We note that NIM of MBB might lower because bonds with high interest rate have been gradually expiring.
Merger SDFC into MBB might increase provision expenses. Because credit size of SDFC is much smaller than of MBB and many debts of SDFC was sold to DATC, VAMC, charged adequate provision, this merger have insignificant impact on business result of MBB.