TPB – Strong all facets – Update

• 3Q21 net profit rose 40.2% yoy to VND1,110bn, driven by net gain from trading investment securities jump and historical low CIR.
• 9M21 earnings rose 45.3% yoy to VND3,515bn, fulfilling 76.1% our full year forecast.
• Reiterate Add with unchanged TP of VND52,000.

3Q21 recap: NIM was shrinking on qoq basis, CIR hit record low

3Q21 net interest income (NII) rose 37.3% yoy, driven by a 20.5% yoy loan book growth and 19 bp yoy net interest margin (NIM) expansion. However NIM was compressed on qoq basis as the bank lowered lending rates to support pandemic-hit clients. The bank targeted to offer a supporting lending package of VND400bn in 2H21, of which 21% was used in Jul and Aug. Thus, 3Q21 assets yield fell 90bp qoq to 7.4%, bringing NIM to decline 71bp qoq to 4.1% in 3Q21. Net gain from trading investment securities jumped over 10x yoy to VND913bn, accounting for 24.9% TOI, mainly streaming from valuable papers trading. Cost income ratio (CIR) hit record low of 25.6% in 3Q21 as operating expense rose 16.2% yoy due to declining marketing expenses. 3Q21 provision expense surged 223.5% yoy. Consequently, 3Q21 net profit rose 40.2% yoy, lower than that of 55.2% yoy in 2Q21.

Asset quality remained intact

Non-performing loan (NPL) ratio fell to 1.04% at end-3Q21 from 1.15% at end-2Q21 on aggressive bad debt write-off which annualised ratio rose to 2.8% in 9M21 from 1.1% in 1H21. Restructured loan grew to VND1,455bn (1.09% loan book at end-3Q21) from VND1,261bn end-Aug. However, loan loss reserve (LLR) fell to 115.4% at end-3Q21 from 144.8% at end-2Q21.

We maintain our net profit CAGR forecast of 24.2% in 2021-23F

We expect loan book to grow 20% yoy in 2021, then rise to 24% yoy in 2022-23F supported by the loosening monetary policy and the economic recovery. We forecast NIM to improve 32bp over the period, lifted by both asset yield expansion on increasing penetration in mortgage lending and cost of fund improvement on better CASA ratio. Overall, NII CAGR would reach 22.6% in 2021-23F. Plus a 36.5% non-interest income CAGR on 50% net fee income CAGR, and CIR of c.39%, we forecast earnings CAGR at 24.2% in 2021-23F.

Reiterate Add with unchanged TP of VND52,000

Our TP is VND52,000, based on residual income valuation (COE: 14%, LTG: 3%) and 2x FY22F P/BV, weighting equally. Upside catalysts include NIM rising above our forecast and/or a higher-than-expected credit growth. Downside risk is higher-than-expected bad debts caused by the pandemic.
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