Update TCB – NEUTRAL

TCB ended a quite difficult year with a 10.5% decline in profits due to a strong contraction in NIM of 1.28 percentage points to 4.09% and a doubling of provision costs compared to 2022. However, we see some positive points in 2H2023 with CASA rebounding, NIM recovering slightly, NFI improving and NPL being controlled.

Balance sheet growth was good with consolidated credit growth reaching 21.6% in 2023, driven mainly by large corporate lending (up 72.8%) in the real estate and manufacturing sectors.

We forecast that PBT in 2024 is expected to reach VND 27,630 billion, up 20.7% compared to 2023 with growth drivers coming from expanding NIM and a slight decrease in credit costs.

NII in 2024 is expected to increase by 24% compared to 2023, based on expected credit growth in 2024 of 19% and NIM increasing by 15 bps.

NFI is forecast to continue to face difficulties because the banca and IB businesses are not expected to fully recover soon. Therefore, we expect non-interest income to have a modest growth of 1.9% compared to 2023.

Provision costs are expected to stay flat in 2024 because TCB increased provisioning in the last quarter of 2023, bringing the NPL coverage ratio to 102%. Restructured loan accounts for a negligible proportion and has been 100% provisioned, while NPL formation pressure will continue to ease in 2024 thanks to a more favorable macro environment.

We downgrade our recommendation from BUY to NEUTRAL because TCB stock price has increased 24% since our last report, while the target price is almost unchanged at 42,300 VND/share. Our target price is equivalent to the forward P/E and P/B at the end of 2024 of 6.8 times and 1.0 times.