HDB_Solid bank with short-term catalyst

BUY

TP upside (downside) +16%
Close 20 Apr 2021
Price                               VND 27,200
12M Target                   VND 31,656
Previous Target (*)     VND 23,710
% change                      +34%

What’s new?

• We raise our target price by 34% on increased earnings forecasts and reduced discount rate.
• We increase our loan growth assumption to 22% in 2021E.
• 2021E PATMI forecast increased by 4% to VND5.3tn (+25% YoY).

Our view

• Maintain BUY. The stock trades at 1.5x 2021E P/B with 2021E ROE of 19%.
• Solid asset quality and capital adequacy will help boost credit growth.
• 100% of HDB’VAMC exposure has been cleared in 2020, which should result in reduced provisioning going forward.
• Banca deal is a short-term catalyst.

Solid bank with short-term catalysts

We increase our 2021E loan growth forecast on the assumptions of economic recovery and persistent SBV monetary easing. As such, we now forecast HDB’s loan growth to reach 22% in 2021E.

Our NIM forecast is slightly decreased by -7bps to 4.68% for 2021E (-2bps YoY) on slightly lower yields and increased interest-earning assets.

We tweak up our net fee income forecast by 4% to VND1.4 tn for 2021E (+49% YoY). The potential renegotiation of HDB’s bancassurance exclusivity deal with Dai-ichi Life could help to boost fees even further.

Operating expenses forecast is increased by 13% to VND7.5 tn for 2021 (+22% YoY). Our adj. CIR forecast for 2021E is 44.9% (-1.6ppt YoY).

We raise provisioning forecast by 14% to VND2.4 tn for 2021 (+35% YoY).   

Net-net, our PATMI forecast increases by 4% for 2021E and 8% for 2022E, implying PATMI growth of 25% YoY in 2021E and 20% in 2022E.

PG Bank acquisition is off the table. As discussed in our previous company update, the PG Bank acquisition is unlikely to occur. The removal of this overhang leaves us with a more positive outlook on HDB.

Yuanta vs. the consensus. Our earnings forecasts are in line with the consensus, but we believe that our provisioning forecasts for 2021E-23E are higher than the Street after factoring in restructured debt.

Maintain BUY. HDB trades at 1.5x 2021E P/B versus the sector median of 1.6x. We expect HDB’s 2021E adjusted ROE to reach 19% compared to the sector median of 18% (source: Bloomberg). Near-term catalysts include loan growth outperformance and a potentially renegotiated bancassurance exclusivity fee. We raise our target price to VND31,656, implying 1.7x 2021E P/B and a 12-month TSR of 16%. As such, we maintain our BUY rating.

For the complete report, please access here: HDB_Company Update_Apr 2021

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