STB Update – BUY

2024’s business results were quite positive, particularly in 2H2024, leading to a 32.6% y/y increase in PBT, exceeding the plan by 20%. Profit growth was driven by improvements in core business (NII, fee income) and a reduction in provision expenses.

As STB has fully provisioned for legacy bad assets (NPLs, VAMC bonds, accrued interests,…), it no longer faces provisioning pressure and may recognize reversal gains upon receiving these payments in the future. However, we see that STB has not yet received 40% of the Phong Phu Industrial Park debt in Q4/24 as planned, amounting to VND 3,174 billion, along with late payment interests. According to the schedule, the buyer of this debt must pay 40% by the end of 2024 and the remaining 40% by the end of 2025.

With STB’s financial indicators continuing to improve and the CAR ratio rising to 10.14%, we expect credit growth of STB in the coming years to outpace previous years, reaching 14% per year.

NIM may slightly decline in 2025 due to downward pressure on lending rates following government and SBV policy directions. We forecast 2025 NIM to be 3.61%, down 12 bps y/y.

Provisioning expenses in 2025 are expected to increase by 16.9% y/y, raising the NPL coverage ratio slightly to 70% from 68%. Asset quality is expected to remain stable in 2025, with the NPL ratio decreasing slightly from 2.4% to 2.33%.

We forecast 2025 pre-tax profit to reach VND 15,034 billion, up 18.2% y/y.

We note that while our profit projections exclude extraordinary gains from the recoveries of the Phong Phu Industrial Park debt sale and the auction of the 32.5% STB shares, we believe their recovery prospects are quite clear, with execution potentially occurring in 2025. Therefore, we include the value of these pending recoveries in our valuation, resulting in a one-year target price of VND 50,700 per share.