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TCB Update – BUY
10/02/2025 - 2:33:46 CHVIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT STOCK BANK (TCB)
We recommend BUY for TCB with a target price of VND 33,100/share. The valuation includes the possibility of TCBS Securities Company being IPO’d and listed, assuming a valuation of 3.0x BVPS, higher than the industry average thanks to its leading scale, above-industry average ROE and synergies within TCB’s customer ecosystem.
Despite the slowdown in 4Q24, TCB’s 2024 business results are still quite positive with TOI and PBT growing by 17.3% and 20.3% respectively. Excluding the impact of the refund of upfront fees to Manulife due to the termination of the exclusive bancassurance agreement, TOI and PBT grew by 21.8% and 28.2% respectively.
Credit growth for the whole year of 2024 reached 21.7%, higher than the industry’s credit growth of 15.1%. Of which, outstanding home loans grew by 21.8% thanks to improved housing supply, especially in the Northern region. With the SBV’s credit expansion orientation, we forecast that TCB’s credit growth could continue to reach 20%/year in 2025 and 2026.
NIM for the whole year of 2024 will reach 4.27%, up 18 bps yoy thanks to a sharper decrease in funding costs than asset yields. However, we see NIM falling for two consecutive quarters as funding costs have bottomed out, while lending rates have fallen in line with the Government’s guildance and TCB allocated credit to segments that have lower risk-weights. We forecast that NIM will recover slightly, however, for the whole year of 2025, NIM will still decrease by 18 bps compared to 2024, reaching 4.09%.
Although we forecast an improvement in asset quality in 2025, core business operating profit may grow at a slower pace. We project that the 2025’s PBT will reach VND 32,817 billion, up 19.2% y/y. Excluding the impact of the refund of upfront fees to Manulife, the 2025’s PBT would grow by 11.8% y/y.
NFI is forecasted to grow by 20.7% y/y in 2025. However, excluding the impact of the refund of upfront fees to Manulife, the projected NFI in 2025 would only increase by 4.2% y/y due to slow payment fee income growth and the lack of income from bancassurance activities.
Asset quality is improving, but potential risks still require monitoring. TCB’s overdue loans and restructured loans continue their downward trend. By the end of Q4/24, the NPL ratio and Special mentioned loan ratio were at 1.12% and 0.7%, respectively – among the lowest in the industry. Restructured loans under Circular 02/2023 and Circular 53/2024 (impacted by Typhoon Yagi) were approximately 0%.
Interest collection days dropped sharply in Q4/24. We observed a significant increase in interest collection days from early 2023 (Q1/23: 55 days) to Q3/24 (83 days) before it suddenly declined to a healthy level of 49 days by the end of Q4/24, as TCB collected over VND 5,700 billion in accrued interests. While there are no details on these accrued interests, we note that TCB’s lending structure, which is heavily focused on real estate – especially large-scale projects with concentrated sales periods and various interest grace policies – may naturally lead to an increase in accrued interest days. Nevertheless, we highlight the potential risk of deteriorating asset quality if accrued interest days rise too quickly.
Despite potential risks are still exists, we project provision expenses to increase only slightly by 2.6% in 2025, as the economic outlook and real estate market recovery are expected to reduce NPL pressures on the bank. Additionally, TCB’s good NPL coverage ratio of 114% provides further support.
Re-valuation potential from IPO and listing TCBS. We recommend BUY for TCB with a 12-month target price of VND 33,100/share. This valuation includes a potential re-valuation of TCB due to the expected IPO and listing of TCBS, assuming a valuation of 3.0x BVPS – higher than the industry average due to TCBS’s leading market position, above-industry average ROE, and synergies within TCB’s customer ecosystem.
