CTG Update – OUTPERFORM

VIETNAM BANK FOR INDUSTRY AND TRADE (CTG)

Impressive Q4/23 business results with PBT +58.1% q/q and +43.9% y/y

It seems that the most difficult time has passed for CTG when almost all of the bank’s financial indicators showed clear improvement in Q4/23. Specifically, PBT reached VND7,699 billion, +58.1% q/q and +43.9% y/y, thanks to NIM recovering 17 bps q/q to 3.13%, CASA ratio continued to grow to 22.5%, category 2 loan ratio and NPL ratio decreased by 82 bps and 24 bps to 1.55% and 1.13%, respectively.

By the end of 2023, PBT reached VND 25,100 billion, (+19.8% y/y). Balance sheet expanded well thanks to 15.5% y/y growth in total credit and total assets exceeding VND2 quadrillion. CAR was 9.4% and NPL coverage ratio was 167%.

Profit in 2024 is expected to grow by 32.8% y/y thanks to flat provision costs

We expect CTG’s credit growth to reach 15% in 2024, equivalent to the sector growth according to the guidance of the SBV. NIM is forecasted to increase slightly by 6 bps to 3.0% thanks to sustainable low deposit rates that will continue to be reflected in cost of funds.

NFI is expected to grow by 11% thanks to stable growth in service income, forex trading and off-balance sheet NPL collection in 2024.

Operating costs continue to be controlled in 2024 with an increase of 13% and CIR (before welfare & bonus funds) of 28.2%, among the lowest in the banking sector.

Provision costs in 2024 are forecast to almost unchanged (+1.2% y/y) thanks to (1) economic recovery that helps overdue loan growth no longer be as high as in previous years and (2) solid provision buffers with a NPL coverage ratio of 167%, helping to reduce provisioning pressure.

PBT in 2024 is forecast to reach VND 33,337 billion, +32.8% compared to 2023.

Raise target price and maintain OUTPERFORM recommendation

We raise CTG’s target price by 24.2% to VND40,000/share and maintain our OUTPERFORM recommendation because CTG stock price has also increased by 22.8% since our last report. The above target price is equivalent to the forecast P/E and P/B at the end of 2024 of 9.0 times and 1.4 times.