VPB – Smooth sailing – Update

• FY21 net profit (NP) grew 13.4% yoy to VND11,808bn, fulling 90% of our full year forecast.
• We forecast FY22F earning to grow 28.4% yoy to VND15,163bn.
• Reiterate Add rating with a higher TP of VND45,800 base on a target P/B of 2.2x for FY22F book value.

Shining parent bank, dimming FE Credit
The parent bank of VPB posted VND31,087bn in FY21 net profit (317.6% yoy); mainly thanks to the divestment of 49% stake in FE Credit. If excluding this one-off gain, FY21 NP of parent bank was estimated to grow 44.2% yoy; driven by 26.7% yoy loan growth and 18.9% yoy net fee income (NFI) growth. Meanwhile, FE Credit’s total operating incomes decreased 12% yoy with 14.2% yoy loan growth and 21.1% NIM in FY21, operation expenses decreased 7% yoy while provisioning surged 16% yoy. All in, FE Credit pre-tax profit reached only VND0.6bn (-83.6% yoy).

Still the best bank in term of profitable metrics
In FY21 consolidated results, VPB delivered 7.63% of NIM (highest among banks) and 18% of ROE. NPL ratio slightly inched up to 4.47% at end-FY21 from 3.4% at end-4Q20. Of which, NPL ratio of parent bank managed at 1.5%; while that of FE Credit was about 13.6% per our estimate. As the bank aggressively booked provision with 112% yoy, consolidated loan-loss reserve (LLR) ratio increased to 60.9% from 45.3% at end-4Q20 – the highest since FY17. At end-FY21, VPB reported CAR of 14.2%; in the top among banks.

Embarking the digital banking targets
After offloading its stake in FE Credit, VPB embarked the journey to transform from a traditional bank into a digital bank revolving around VPBank Neo which was launched since June 21. VPBank Neo plays as a platform for financial and integrated services in VPB’s ecosystem, serving both individuals and corporates. VPB also expands its ecosystems by strengthening partnerships with other Fintech, mobile banking and other retail businesses. The bank sets up VPBank Securities JSC (acquired ASC Securities JSC) with chartered capital of VND9,000bn.

Reiterate to Add rating a higher TP of VND45,800
We expect VPB‘s NP to grow 28.4% yoy in FY22F, on the back of 23% yoy of loan growth and 7.7% of NIM. Our new 1-year target price of VND45,800 based on a target P/B of 2.2x for FY22F book value. Downside risks include higher-than-expected inflation might hinder loan growth and higher-than-expected bad debts. Upside catalyst is the possibility of a private placement for strategic investors following the bank‘s Foreign ownership limit (FOL) to be lifted from 15.0% to 17.5% in March, 2022.

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