Update TCB – BUY

We cut our 1-year target price by 3.3% to VND37,700/share, mainly due to (1) lowering our target P/E from 8.0x to 7.0x to reflect the high interest rate environment and (2) rolling forward our target price to mid-2027. However, we upgrade our recommendation from OUTPERFORM to BUY as TCB’s share price has declined 17.6% since our previous report. In 1H26, the bank achieved 49.4% of its PBT target and 49.7% of our forecast. For 2026F, we maintain our PBT forecast at VND37,337bn, up 14.7% y/y (AGM target: +8-15% y/y).

2Q26 earnings were quite positive. TOI growth (+17.3% y/y, +9.3% q/q) was driven by both NII (+17.8% y/y, +13.0% q/q) and NFI (+15.9% y/y, +0.6% q/q). An unexpected decline in provisioning expenses (-35.7% y/y, -30.3% q/q) supported strong PBT growth (+22.4% y/y, +9.0% q/q).

Credit growth remained strong (+25.0% y/y, +15.2% YTD and +11.2% q/q), driven by lending to real estate developers. Since 2Q26, banks have also no longer been constrained by the 25% cap on full-year credit growth. In addition, around 2.7% of TCB’s outstanding loans to key projects and social housing projects are excluded from the credit growth quota. NIM recovered (+29 bps q/q, although -11 bps y/y) to 3.75%, as high lending rates began to be more fully reflected in asset yields.

Fee income was impressive (+73.8% y/y and +16.3% q/q), driven by strong growth across most segments, including payments, bancassurance, investment banking, and L/C services. However, off-balance-sheet NPL recoveries slowed (-22% y/y) due to low liquidity in the real estate market.

Asset quality remained resilient. NPL ratio of 1,1% and Group 2 loan ratio of 0,7% remained stable despite challenges from the high interest rate environment and a weakening real estate market. NPL coverage ratio remained at a healthy 126%. Nevertheless, we note that prolonged high interest rates and tighter controls on real estate credit are increasing systemic risks.

While we expect PBT growth to remain solid, the prolonged high interest rate environment lead to valuation compression. We therefore lower our target P/E from 8.0x to 7.0x, implying a 1-year target price of VND30,130/share. Adding the revaluation value of TCB’s investment in TCX of VND7,540/share, we arrive at a total 1-year target price of VND37,700/share for TCB. We estimate the valuation correlation between TCX and TCB at 3.8%. In other words, for every 10% increase in TCX’s share price, TCB’s valuation would increase by 3.8% accordingly.