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TPB – A small bump on the road – Update

Company Note 10/08/2022    73

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  • 2Q22 net profit (NP) surged 37% yoy thanks to a robust top-line growth of 33% yoy. 1H22 NP grew 26% yoy, fulfilling 50% our forecast.
  • We expect TPB’s earnings to grow 22%/24% yoy over FY22-23F.
  • Attractive valuation; reiterate Add with a lower TP of VND38,500.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND28,600

VND38,500

0.00%

ADD

              FINANCIALS

1H22 results: so far so good

TPB posted VND1.7tr in 2Q22 NP (+37% yoy) mainly driven by 33% top-line growth. Specifically, non-interest income soared 60% yoy given bancassurance sales recovery and robust payment fees. The great 2Q22 result has contributed to a solid 1H22 NP growth of 26% yoy to VND3tr. Asset quality stayed resilient with NPL ratio of 0.85% at end-2Q22 (vs 0.8% at end-FY21 and 1.1% at end-1Q22) and LLR of 162% at end-2Q22 (153% at end-FY21). Noted that the bank kept writing off bad debts aggressively (VND1.1tr, especially in 2Q22).

2H22 outlook: A small bump on the road

One of the most debatable issue in Vietnam financial market is that the government has aimed to manage credit flows into property sector and stricter supervision on corporate bond (c-bond) issuance to enhance the integrity of the capital market in the long run. This action has created short-term hurdles to banks having exposures to mortgage and c-bond, like TPB (accounting for 18.4% and 13.4% of total credit balances, respectively). At end-2Q22, TPB’s credit growth was 9.1% ytd (11% ytd at end-1Q22); in which c-bond slowed its momentum with 25% ytd (48% at end-1Q22) due to prepayment. With this situation, although 1H22 was 9% ytd, TPB will slower its credit expansion in 2H22 to reach 14%/18% growth for FY22-23F (vs. previous forecasts of 22%/20%).

In terms of NIM, 1H22 NIM shrank to 4.2% from 4.6% of 1H21, in which asset yields declined 70bps to 7.5% due to a lower lending rate to support pandemic-hit clients and especially the backward result in c-bond balances during 2Q22. This on-going struggles in c-bond market will threaten the bank’s asset yields and thus its NIM in 2H22, in our view. Moreover, rising deposits rate caused by inflation is another key risk to watch, even though TPB has capacities to protect NIM from severe compression thanks to its low LDR of only 55% at end-2Q22, indicating a weak demand for fund raisings and thus a relatively low costs of funds. We estimate TPB’s FY22F NIM will narrow 23bps yoy to 4.1%.

Reiterate ADD with a lower TP of VND38,500

We expect TPB to deliver a 22%/24% NP growth in FY22-23F. TPB’s share price declined 30% from peak in Apr-2022 as inflation and capital market scrutiny raised concerns towards the bank, which strongly depressed the bank’s valuation to 1.4x FY22F P/B, equal to -1SD range despite its solid fundamentals, implying an attractive valuation. We lowered the FY22-23F EPS forecasts by 2.1%/2.4% and P/BV to 1.9x (from 2.0x) to derive a TP of VND38,500 (-6.3% vs. previous TP). Downside risks include higher-than-expected inflation and bad debt spike.

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