HDB- Strong 3Q19 results

Action:

Hold-Underperform

TP upside (downside) +11%

Price  (18 Oct 2019):  VND 27,950

12M Target:                  VND 30,970

Strong credit growth. Based on local media reports, we estimate that HDB’s credit growth has increased 16.5% YoY or 14.4% YTD. The bank has not disclosed detailed 3Q19 financial statements, but we continue to believe that high credit growth drove the strong 3Q19 and 9M19 YTD profit.

Prelim 3Q19 PBT was VND1.2 tn (+7% QoQ / +45% YoY), and 9M19 PBT of VND3.4 tn was up 18% YoY. This completed 67% of the bank’s full-year target, 73% of our 2019E forecast, and 76% of Bloomberg consensus PBT.

Higher credit growth quota. We expect the SBV to grant HDB a higher credit quota (i.e. 20%) in 2019 given that it achieved early Basel II compliance in October 2019.

Asset quality remains solid. The bank’s reported NPL ratio was 1.10% as at 3Q19, which is only 2bps higher than that of 2018A.

We reiterate our HOLD-Underperform recommendation. As highlighted in our initiation note titled “Wait for clarity on the PG Bank deal”, we think that investors may get a better entry price after the PG Bank acquisition is complete. This is largely a technical concern, as we believe that many of PG Bank’s current shareholders are likely to monetize their investments once their PGB shares are converted into HDB’s liquid shares. Thus, we would wait for clarity on the acquisition with PGBank before revisiting our cautious short-term view on HDB.

For the complete report, please access here: HDB_3Q19 Update_10.2019

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