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TCB – Best performer in the industry – Update

Company Note 29/10/2021    120


  • 3Q21 net profit rose robustly 40% yoy thanks to stronger credit growth and lower expenses.
  • We raise EPS forecast by 9-12% for FY21-23F on higher credit and NIM expansions, lower CIR, and higher credit cost.
  • Reiterate Add with higher TP of VND64,100.

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3Q21: positive credit growth despite lockdown

TCB’s 3Q21 credit expanded 33% yoy but only 3.9% qoq, lower than the level of 6.2%/6% qoq in 1Q/2Q21. Together with a flat yoy net interest margin (NIM) of 5.6%, net interest income (NII) rose 31% yoy. However, in comparison with that of 2Q21, 3Q21 annualised NIM fell 32bp, mainly due to 26bp assets yield drop on lowering lending rates to support pandemic-hit customers in 3Q21. Meantime, non-interest income (non-II) fell 13.3% yoy due to a 81.2% yoy decrease in net other income. On the cost side, cost income ratio (CIR) fell to 29.9% in 3Q21 from 33.2% in 3Q20; while provision expense reduced 43% yoy. Hence, net profit rose 40% yoy in 3Q21, lower than that of 67.2% yoy in 2Q21.

9M21 robust topline growth, lower CIR and provision

TCB’s credit grew to 17% in 9M21 from 12.6% in 1H21, and nearly double the rate of 9.2% in 9M20, on 15.7% ytd loan book growth and 25.1% ytd corporate bond rise. 9M21 annualised NIM expanded 89bp yoy to 5.7% due to a 118bp yoy cost of fund decline on CASA ratio improvement to 49% at end-3Q21 while assets yield fell only 12bp yoy, cushioned by solid retail lending rise (+24.3% ytd). Hence, NII jumped 46.3% yoy in 9M21. Meantime, non-II rose 24.7% yoy driven by a 37.2% yoy NFI hike. CIR fell to 28.9% in 9M21 from 32.8% in 9M20 on better operational efficiency; while provision expense fell 9.2% yoy, given by the bank’s solid asset quality position. Hence, net profit shot up 60.6% yoy in 9M20, 3.2x the growth rate seen in 9M20, fulfilling 85.5% our FY21 forecast.

Asset quality remains solid

Non-performing loan (NPL) ratio grew to 0.57% at end-3Q21 from 0.36% at end-2Q21, while loan loss reserve (LLR) fell to 184.4% at end-3Q21 from 258.9% at end-2Q21. Meantime, restructured loan rose to VND2.8tn (0.9% loan book at end-3Q21) from VND2.7tn at end-2Q21.

Reiterate Add with higher TP of VND64,100

We raise our 2021-23F EPS by 9-12% following higher than previous expectation credit growth and NIM expansion; lower-than-previous-expectation CIR; and higher credit cost. Hence, our new TP is increased to VND64,100 from VND57,100 previously, following residual income valuation (COE: 12.7%, LTG: 4%), and 2.2x FY21-22F P/B, weighted equally. We rolled over to average FY21-22 BV from FY21 BV. Upside catalysts are higher-than-expected loan growth and NIM expansion. Downside risk is higher-than-expected bad debt

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