Bank Sector_Preview 2023E

We forecast aggregate 2023E PATMI to increase by +16% YoY across the 27 listed banks as credit growth slows and provisioning rises YoY.

We expect 2023E net interest income to increase by +12% YoY. We expect NIM to be constrained in 1H23 on high funding costs and lower short-term funding used for medium- and long-term loans. However, we assume that NIM will improve in 2H23, with full-year NIM to remain flat YoY at 3.57% in 2023E.

2023E fees to increase by +20% YoY. Bancassurance sales might slow in 2023E along with tepid credit growth.

We expect opex to increase by +10% YoY in 2023E on staff costs and catch-up spending related to digitalization. Still, we expect adjusted CIR to decrease slightly by -1ppt to 35% in 2023E.

Turning the page on asset quality. We expect NPLs to increase in 2023E given the expiration of Circular 14 and potential problems in the real estate market. We forecast the sector NPL ratio to reach 1.65% in 2023E (+10bps YoY). Thus, provisioning might increase, especially at banks with low loan loss reserves (LLR), whereas banks with high LLRs (i.e VCB) will have the flexibility to lower provisioning to boost earnings.

We expect more strategic stake sales to happen in 2023E. Also, the SBV is considering increasing the FOL room above the current 30% (but not to exceed 49%) for banks that take over weak players. We don’t think this will take place anytime soon, but it should create buzz for the sector.

Attractive valuations. The sector trades at a median of 1.0x 2023E P/B with 2023E ROE of 18% (source: Bloomberg consensus).

We continue to recommend sticking with high-quality banks. This preference is reflected in our list of top picks in the sector: VCB, MBB, and ACB.

For the complete report, please access here: Bank_Sector_Preview_2023E

Analyst: Tanh Tran, tanh.tran@yuanta.com.vn