Vietnam Technological Commercial JS Bank – Buy (TCB : HSX – Bank)

Vietnam Technological Commercial JS Bank – Buy (TCB : HSX – Bank)

• Credit growth of 20.3% y/y was the highest among listed peers, and was driven by expansion of its corporate bond book (+175.0% y/y). Meanwhile the loan book shrank a little (-0.6% y/y).

• Deposit growth of 17.8% with higher CASA was a result of a successful zero fee campaign.

• The NIM dropped slightly by 5 bps, mainly due to a shift among IEA classes, with a higher weight for debt instruments and lower weight for loans, and the shift to lower margin short-term working capital loans during the first 9M.

• NII grew strongly (+24.6% y/y) and core NFI grew exceptionally well (+49.5% y/y).

• Operating expenses increased 24.4%, but the CIR was still very well controlled at 31.8%, or 33.5% (excluding one-off income).

• Provisioning expenses dropped significantly (-48.9% y/y) thanks to a huge provision reversal on NPLs sold previously. Meanwhile, the NPL ratio was well controlled at 1.75%.

• ROAA of 2.87% (versus 2.55% in FY2017), continued to improve and was still the highest among peers. However, post-capital raising the ROAE of 21.5% (versus 27.7% in FY2017) was no longer above peers.

• Our fair value of VND 38,500 per share is equivalent to 2.59xs trailing P/B, based on a RI valuation method.

• CAR of 14.3% (at end Q3 FY2018) is the highest among listed peers, with very low dilution risk in the next three years. However, the FOL is locked at 22.5%, and it seems unlikely that TCB will open this up anytime soon.

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