VCB – Not cheap but a solid long-term bet – Initiation

• VCB is a well-regarded state-owned commercial bank (SOCB) with an extensive network, a critical role in Vietnam’s national payment system and leading card issuer.
• Its strong deposit franchise and large client base would support a gradual shift in loan mix to higher-yield segments such as personal lending, in our view.
• Its asset quality is best in class, with well-controlled NPLs and a high provisioning buffer (NPL of 1.1%, loan loss reserve ratio, LLR, of 131% at end-FY17).
• We project an enviable net profit CAGR of 17.7% over FY18-20F, with ROE improving to 20.1% by end-FY20F. We initiate with an Hold rating and TP of VND79,500

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