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TCB – Best performer in the industry – Update

Company Note 16/11/2020    360


  • TCB’s 3Q20 net profit grew 21.3% yoy to VND3,099bn, which brought 9M20 NP to VND8,372bn (+18.8% yoy), making up 78.1% of our full-year forecast.
  • We raise FY20-22F EPS forecasts by 0.9%-3%, driven by higher NIM expansion assumptions.
  • Reiterate Add with a higher TP of VND29,300.

Market price

Target price

Dividend yield



VND 23,000

VND 29,300




9M20 retail drove NIM, boosting NII…

9M20 annualised net interest margin (NIM) recorded its highest-ever level of 4.9%, expanding 67bp yoy, lifted by retail NIM rising to 2.4% from 2% in 9M19. Retail lending grew 3% yoy, accounting for 36% of the credit book at end-3Q20 (40% of credit book at end-3Q19), while retail net interest income (NII) rose 40.1% yoy and contributed 50% of TCB’s NII in 9M20 vs. 47% in 9M19/FY19. Interest income from retail lending drove the 29bp yoy asset yield hike. Cost of fund (COF) fell 47bp yoy as (i) CASA grew to 38.6% at end-3Q20 from 28.7% at end-3Q19 due to retail CASA growth of 64.9% yoy (32.6% YTD), which contributed 63% of total CASA at end-3Q20 (end-3Q19: 57.3%), and (ii) deposit interest rates fell. With a 15.6% yoy credit jump on 31.7% yoy corporate bond (CB) and 12.4% yoy loan book increase, TCB’s NII rose 31.6% yoy to VND13,296bn in 9M20.

…while bond related activities lifted NFI

9M20 net fee income (NFI) rose 45.9% yoy, reaching VND3,120bn and contributing 16.2% of total operating income (TOI), driven by a 132.1% yoy increase in bond underwriting fee income and its related activities, which accounted for 45.3% of NFI. Together with a 67.1% yoy rise in net gains from trading investment securities and a 33% jump in net other income, non-II grew 38.1% yoy to VND5,985bn.

Bad debts at lowest-ever level at end-3Q20

NPL ratio fell to 0.6% at end-3Q20, the lowest level among peers; loan loss reserve (LLR) rose to 148% at end-3Q20, the second highest level in the industry, due to TCB’s aggressive provisions which rose 3.7x yoy in 9M20. Although cost-income ratio improved to 32.8% in 9M20, net profit grew only 18.8% yoy to VND8,372bn, forming 78.1% our previous full-year forecast.

Raise FY21F/22F EPS forecasts by 1.8%/3%

We now expect net profit to grow 17.1%/16.7% in FY21/22F, vs. 16%/15.3% previously, driven by a higher NIM increase of 7-13bp on lower funding costs. As a result, NII CAGR is at 15.5% in FY20-22F on c.15% credit CAGR and 5bp expansion in NIM forecasts.

Reiterate Add with higher TP of VND29,300

We raise our TP to VND29,300 following our earnings upgrade and as we roll over to FY21F P/BV. Our TP is based on residual income valuation (COE: 13.7%, LTG: 4%) and 1.2x FY21F P/BV, weighted equally. A potential re-rating catalyst is higher-than-expected credit growth. Downside risk is lower-than-expected NIM expansion.

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