LPB - Provisioning spikes in Q3, but momentum carries from H1 - Earnings Flash

LPB released 9M 2021 results with PPOP of VND3.7tn (USD160mn; +78.9% YoY) and bottom-line net profit of VND2.2tn (USD96mn; +59.7% YoY), achieving 75.7% and 81.3% of our FY2021 forecasts, respectively. The increase in NPAT was mainly due to (1) a 33.8% YoY increase in NII, (2) 52.9% YoY increase in pure NFI, (3) 85.9% YoY increase in FX trading gains (from a low base), (4) VND7bn gain from investment securities vs a loss of VND62bn in 9M 2020, and (5) a 6.0% YoY increase in OPEX that significantly lagged TOI growth of 34.9%; these items were partly offset by a 176% YoY increase in provision expenses. Comparing the last quarter with the same quarter last year, Q3 2021 NPAT saw minimal increase to VND611bn (+3.7% YoY) mainly due to a 157% YoY increase in provision expenses. We will need to discuss with LPB regarding the Q3 2021 restructured loan balance as well as any potential NPL formation in future quarters due to the impact of COVID-19, per the bank’s assessment. At this point, we see potential upside risk to our current forecast for LPB’s 2021 earnings, pending a more extensive review.

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