Update CTG – OUTPERFORM

VIETNAM BANK FOR INDUSTRY AND TRADE (CTG)

We maintain an OUTPERFORM recommendation for CTG with a target price of VND40.600 per share, based on target P/E and P/B of 9.6x and 1.3x, respectively. Business results have significant room for improvement in the coming years, supported by a solid provision buffer.

CTG’s 9M2024 results were relatively positive, with TOI and PPOP growth of 16.2% y/y and 17.4% y/y, respectively. However, provision expenses increased by 21.8% y/y, resulting in PBT growth of only 12.1% y/y. The NPL coverage ratio as of Q3/24 was strengthened to 153% from 114% at the end of Q2/24.

Credit growth reached 9% ytd by the end of Q3 2024, and 15.8% y/y, in line with the industry’s overall growth rate. We forecast for the full year 2024 CTG’s credit growth at 14%.

NIM for 9M2024 slightly increased by 7 bps y/y to 3.03%. However, CTG announced plans to reduce lending rates by up to 2% on loans totaling approximately VND100,000 billion (~6% of total loan book) for customers impacted by Typhoon Yagi, effective through December 31, 2024. We estimate that this will reduce CTG’s Q4/24 PBT by VND1,000–1,500 billion. We forecast full-year 2024 NIM at 2.94%, remaining flat compared to 2023.

Service fee and forex income in 9M2024 declined by 2.4% and 9.9% y/y, respectively. However, off-balance sheet debt recovery surged by 86.3% y/y, particularly in Q3/24, helping non-interest income grow by 6.3% y/y in 9M2024.

Asset quality improved in 9M2024 following challenges in 2023. In Q3/24, a Category 4 loan of approximately VND8,000 billion from a corporate customer in the resort real estate sector was reclassified as a Category 1 loan. However, rising NPLs in other sectors led to a slight decrease in the NPL ratio in Q3 2024 to 1.45%, down 12 bps q/q but up 8 bps y/y. The category 2 loan ratio was stable at 1.44% q/q and significantly down by 93 bps y/y.