HDB_Company Update_Dec 22

Attractive valuation – upgrade to BUY

We increase our 2023E loan growth forecast by +4ppt to 21% YoY.

NIM forecast down by -13bps to 4.67% for 2023E (+4bps YoY) on higher funding cost than our previous assumption.

Net interest income forecast raised by a modest +1% to reach VND21.4 tn (+23% YoY) in 2023E on the higher loan volumes.

Net fee income forecast raised by +18% to VND3.4 tn for 2023E (+24% YoY). This does not factor in the potential new bancassurance exclusivity deal.

Operating expenses forecast increased slightly by +2% to reach VND9.7tn (+22% YoY).

We raise our provisioning forecast by +23% to VND3.7 tn for 2023E (+27% YoY) as we increase our loan growth assumption. HDB’s 3Q22 loan loss reserve ratio of 81% is relatively low in our view, and we assume higher provisioning going forward given the potential for rising NPLs.

Net-net, our PATMI forecast increases slightly by +1% to reach VND9.6tn in 2023E, implying PATMI growth of +21% YoY in 2023E.

Yuanta vs. the consensus. Our earnings forecasts are 12% above the consensus for 2023E, probably due to our high credit growth forecast.

Valuation is cheap. HDB trades at 1.1x 2022E P/B or 0.8x 2023E, which is in line with the sector median despite its strong operational results.

Upgrade to BUY. Our new target price implies 2023E P/B of 1.2x and TSR of 45%, and we upgrade to BUY from Hold-Outperform. We see a near-term upside catalyst for HDB’s share price and earnings in 2023 from the potential new bancassurance exclusivity fee.

For the complete report, please access here: HDB_Company Update_Dec 2022

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