VCB – Steadily moving forward – Update

• VCB plans its 2021F PBT of VND25,200bn (+9.4% yoy) on a 12% yoy credit expansion and improving NIM to 3.1%
• 1Q21 net profit jumped by 65% yoy to VND6,900bn on booking upfront payment fee and well-managed expenses.
• Reiterate Add with higher TP of VND119,500 as we revise our target P/B to VCB’s 3-year average of 3.6x.

2021 AGM key takeaways
According to the Annual shareholder meeting on 23 Apr, VCB guides for a 9.4% yoy increase in FY21F to VND25,200bn (equivalent to 87% of our forecast). VCB’s FY21F targets include: 1) 6% growth in total assets; 2) 12% credit growth; 3) maximum non-performing loan ratio of 1%; and 4) improving NIM to the pre-pandemic level of 3.1%. At end-1Q21, the bank had restructured c.VND3,900bn credit amount (~0.45% total gross loan). The bank continues to submit to the AGM for approval of a 6.5% private placement plan for foreign investors. The implementation period is in FY21-22F.

1Q21 total operating income rose by 28% yoy on booking upfront fee
VCB’s 1Q21 net interest income grew 11.6% to VND10,082bn on stable net interest margin (NIM) and strong credit growth (15% yoy). During 1Q21, VCB continued to reduce lending rates to support customers affected by the Covid-19 outbreak, thus reducing assets yield by 89bps. Meanwhile, VCB’s funding cost dropped significantly by 95bps as CASA ratio improved to 30% at end-1Q21 from 26% at end-1Q20, offsetting the decrease in assets yield. Besides, non-interest income (non-II) surged by 72% as the bank booked a part of the exclusive upfront fee with FWD in 1Q21 fee income (approx. VND1,800bn, as our estimation).

Well-managed expenses boosted the bottom line
Operating expenses slid modestly by 3% yoy, trailing 28% yoy growth of total operating income (TOI). Besides, prudent asset management helped contain non-performing loan (NPL) ratio at 0.9% as at end-1Q21, remaining one of the lowest among listed banks. As a result, provision expense only inched up by 6% yoy while loan-loss-reserves increased to 280% at end-1Q21, from 235% at end-1Q20. 1Q21 net profit reached VND6,900bn, forming 31% of our FY21F forecast.

Reiterate Add with a higher TP of VND119,500
We lift our TP to VND119,500 based on equal weight of residual income valuation with a higher target 3.6x FY21F P/BV, which is VCB’s 3-year average historical P/BV. A possible upside to our TP is a higher-than-expected NIM, lifting FY21-23F net profit. A downside risk is a higher-than-expected

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