Company Visit: Sacombank — Underlying business continues to improve

BUY

Current price (02-25-19): VND 12,900

Target price: VND 14,049

Upside:  8.9%

Summary: We met with STB management on Feb 25^th, 2019 for a discussion of their business outlook. Management offered deeper insights into the NPL restructuring and collateral divestment process, while reporting that the underlying business remains very solid. We reiterate our Buy recommendation.

Legacy NPL restructuring: A work in progress. In 2018, VAMC bonds dropped 11% YoY to VND40,233 bn. The NPL ratio decreased to 2.11% at 4Q18 compared to 4.67% at 4Q17. Management recognizes market concerns about the delayed payment structure of previous collateral divestment, and it intends to require full payment for subsequent sales.

Retail loans continue to dominate the balance sheet at 61% of total loans while corporate loans (mainly SME loans at STB) is 39%. The yield spread for retail loans is about 5%, with lending rates at about 11% and cost of funding at about 6%. The bank targets a maximum of 8% of loans for any individual sector.

For the complete report, please download here: STB_Company Visit_Feb 25th 2019

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