STB_NPA recovery progress is key to watch

BUY

TP upside (downside) +41%
Close 23 Apr 2020
Price                       VND 9,150
12M Target            VND 12,950
Previous Target    VND 14,049
Change                   -8%

Company Update

Reducing our credit growth forecast. We lower our 2020E loan growth forecast for STB by -1.5ppt to 12.5% YoY.

NIM forecasts cut by 22bps to 2.32% for 2020E. This is because of the SBV’s policy to decrease loan yields to support individuals and firms hit by the outbreak.

We slash our fee income forecasts by 9% for 2020E given the weak near-term outlook for transaction banking.

Rising provision costs and NPLs. STB is rescheduling payments and retaining pre-outbreak asset quality categorization of related loans. This is in line with the SBV’s policy, which is likely to continue through 3Q20 at least. Thus, STB’s NPL ratio might not rise significantly in 2020E, but it may jump in 2021E. However, we believe that STB will prudently provide adequate provisions beforehand.

We slash our PATMI forecasts by -18% for 2020E and -17% for 2021E. Our reduced PATMI forecasts are 29% below Consensus for 2020E and 24% for 2021E and represent growth of -2% YoY in 2020E but +34% YoY in 2021E.

Cheap valuation – we maintain our BUY rating. The stock is trading at 0.6x 2020E P/BV vs. peers’ median of 0.9x. Even with the reduced price of VND12,950, we still see 41% upside. We continue to view STB as a turnaround play in the long haul. The pandemic is obviously a concern but assuming it can be controlled in 2Q20, the real estate market should start to warm up again. Otherwise, the progress of restructuring may be impeded, which would obviously constitute a downside risk. Thus, we continue to suggest a barbell strategy with VCB (our top pick) as a core holding and STB as a potential rerating story.

Please access here for the complete report: STB_Company Update_04.24.2020

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