STB_Company Update_Jun 2022

We continue to expect STB to resolve all of its legacy assets by 2023E, and loan growth should outperform the sector thereafter.

We expect NIM to be supported by the resolution of legacy bad debt as capital is freed up and shifted into interest-earning assets. We slash our 2022E NIM forecast by -44bps to 2.73% (+13bps YoY) after reducing what we now see as overly aggressive loan yield assumptions).

We lower our operating expenses forecast by -24% to VND11.5 tn (+18% YoY) after witnessing the laudable cost-down results of 2021A.

We increase our provisioning forecast slightly by +5% to VND4.8 tn (+35% YoY), as we believe that the bank should continue to strengthen its provisioning as it accelerates the restructuring.

We increase our PATMI forecasts by +5% for 2022E to VND4.2 tn (+23% YoY). This forecast is -12% below the consensus mean for 2022E, likely due to a higher provisioning forecast. Our PATMI forecast for 2023E is -35% below consensus, as the Street appears to assume (aggressively, in our view) that STB’s will complete restructuring in 2022.

Upgrade to BUY from SELL. The turnaround story continues (we never said it had stopped), but the stock has fallen -38% from the peak and the valuation is once again attractive at 1.1x 2022E PBV vs. the sector median of 1.4x. We increase our target price to VND28,860, implying a TSR of +29% and 2022E PB of 1.4x.

Risks: Valuation alone is not likely a catalyst for outperformance; investors should consider whether a high-Beta turnaround story is an optimal target for capital allocation at this point in the market cycle. The investment thesis depends on the specifics of legacy asset restructuring and VAMC’s planned divestment of its 32.5% stake in STB.

For the complete report, please access here: STB_Company Update_Jun 2022

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