TPB – Go “Tien Phong”, go ahead – Initiation

• We forecast net profit CAGR of 24.2% in 2021-23F, on 24% loan book CAGR and 32bp NIM expansion; 50% net fee income CAGR; CIR of 39%.
• We initiate coverage TPB with an Add rating and TP of VND52,000.

Initiate coverage with an Add rating; potential upside of 18%

We initiate coverage Tien Phong Commercial JS Bank (TPB) with an Add rating and TP of VND52,000 based on residual income valuation (COE: 14%, LTG: 3%) and 2x FY22F P/BV, weighting equally. Our recommendation is premised on: i) livebank brings TPB to lead the wave of fintech application; ii) strong lending capacity on mass access and simple loan process; and iii) controllable asset quality.

Livebank brings TPB to lead the wave of Fintech application

Vietnam is boosting the development of regulatory sandbox for Fintech, helping TPB accelerate customer base expansion and deposit mobilisation ability. For differing from other banks’ networks, TPB’s Livebank operates 24/7 while it has all functions of a physical network except lending characteristics, thus enabling to serve clients at any time, giving TPB advantage in capturing customers.

Strong lending capacity on mass access and simple loan process

Current infrastructure development and plans of HCMC and Hanoi to upgrade some of their areas to be districts, plus the loosening monetary policy encourage people to buy properties, boosting mortgage growth in 2022-23F, which sustains TPB’s robust credit growth and NIM expansion on the bank’s mass access and simple loan process policy.

We forecast TPB to sustain high net profit CAGR 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 net interest margin (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, net interest income CAGR would reach 22.6% in 2021-23F. Together with a 36.5% Non-interest income CAGR on 50% net fee income CAGR, and cost income ratio (CIR) of c.39%, we estimate net profit CAGR to be at 24.2% in 2021-23F.

Upside/Downside catalysts

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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